TRIS Rating Co., Ltd. has affirmed the company rating of Rojana Industrial Park PLC (Rojana) at “A-” with “stable” outlook. The rating reflects Rojana’s proven record in industrial property development, diversified revenue base with reliable income from electricity and utilities sales, as well as strong support from its major shareholders and Japanese partner. The rating also takes into consideration the volatile nature of the industrial property market and the current slowdown of the Thai economy.
The “stable” outlook reflects the expectation that Rojana will be able to maintain its market position in the industrial property development industry. The power and utilities businesses are expected to provide recurring income and reliable cash flow streams to counterbalance the fluctuations in industrial land sales while increasing contribution from the condominium project in China provides another cushion.
TRIS Rating reported that Rojana is one of the leading industrial property developers in Thailand, established in 1988 by the Vinichbutr family and the Sumitomo Group. As of April 2009, the Vinichbutr family held a 31.0% stake and Sumikin Bussan Corporation, a subsidiary of the Sumitomo Group, held 20.6%. Rojana currently owns and operates two industrial parks in Ayudhya and Rayong provinces. During 2006-2008, land sales averaged 500 rai per year, with cumulative land sales of 5,300 rai as of March 2009. Based on an average of 500 rai of land sold per year, the remaining salable area of approximately 4,000 rai is sufficient for future development.
TRIS Rating said, Rojana has its own power plant, operated by Rojana Power Co., Ltd. (Rojana Power), in the Ayudhya industrial park. Rojana Power has continuously increased electricity generating capacity as land sales in the industrial park rose. Capacity increased from 122 megawatts (MW) in 2004 to 267 MW by the end of 2008, to match the needs of customers in the industrial park. Of this amount, 90 MW is sold to The Electricity Generating Authority of Thailand (EGAT) under the Small Power Producer (SPP) scheme; the remainder is sold to Rojana’s industrial customers. Electricity and water sales contributed approximately two-third of total revenue and 45%-50% of total earnings before interest and tax (EBITDA) during 2006-2008.
In the first three months of 2009, the land sales of Rojana were severely impacted by the global economic slowdown as well as domestic political instability, like most industrial developers. Rojana recorded sales of only 4 rai, versus industrial land sales across the Kingdom of 89 rai as reported by CB Richard Ellis (CBRE) during the same period, compared with 1,192 rai in the first quarter of 2008. Nevertheless, land sales of Rojana will improve in the remainder of the year as it will soon close a big sale of more than 200 rai. Power sales and utilities income were also impacted by the global economic slowdown as industrial users were hard hit by tumbling exports. The volume of electricity sold in the first quarter was down 16% over the same period of last year, falling to 299 giga-watt hour (Gwh). Recurring income from power and utilities for the first three months of 2009 was Bt1,032 million, down 7% from Bt1,112 million in the first quarter of 2008. The gross margin of the power business also dropped, falling to 12% from 21% of the first quarter of 2008 due to the high gas cost but inadequate fuel adjustment charges (Ft). The overall gross margin fell to 23% compared with 30% in the first quarter of 2008. However, electricity sales are improving in line with an increase in the utilization rates of the electronics and electrical appliances sectors which are major customers of Rojana. In addition, profitability for the power business is expected to recover in the remainder of the year following the decline in energy prices over the past six months and the flat Ft.
Rojana has successfully diversified into residential property development. After the Madison condominium project in Thailand completed in 2008, Rojana started developing a condominium project with 993 units in Changzhou, China, worth approximately Bt3,300 million. As of mid-June 2009, 55% of the salable area was sold, compared with 46% and 43% as of March 2009 and December 2008, respectively. Sales have been boosted by the economic stimulus packages from the Chinese government. Continued favorable financial policies from the Chinese government and an economic recovery in China would make project sales as smooth as planned.
The global economic recession has deteriorated the industrial property development industry in Thailand. However, foreign investment and international trade promotion policies, together with Thailand’s geographic location, will continue to attract foreign investors and support a positive outlook for the industrial property sector in medium to long term, said TRIS Rating. -- End
Company Rating: Affirmed at A- Rating Outlook: Stable
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