TRIS Rating Co., Ltd. has upgraded the company rating of Pruksa Real Estate PLC (PS) and the ratings of its existing debentures to “A” from “A-”. At the same time, TRIS Rating has assigned the rating of “A” to PS’s proposed issue of up to Bt2,500 million in senior debentures. The outlook is “stable”. The upgrade reflects PS’s ability to consistently deliver strong operating performance and its improving financial position. The ratings take into consideration PS’s leading position in the townhouse segment with average unit price of Bt1 million, proven track record in the middle- to low-income residential property segment, cost competitiveness, and conservative financial policy. The strengths are partially offset by an uncertain political situation in Thailand and the cyclical nature of the property development industry.
The “stable” outlook reflects the expectation that PS will be able to maintain strong operating performance in the medium term. Despite more intense competition in the company’s product segments, profitability should be at an acceptable level. The company is also expected to sustain strong cash flow protection and a conservative financial policy as it continues an aggressive expansion.
TRIS Rating reported that PS is one of the leading residential property developers in Thailand. The company was established in 1993 by Mr. Thongma Vijitpongpun and was listed on the Stock Exchange of Thailand (SET) in December 2005. As of December 2009, the Vijitpongpun family continued to be the largest shareholder, owning a 77% stake. PS has a huge project portfolio, which comprises 112 existing residential projects with the remaining value of Bt27,510 million available for sale and a backlog of around Bt17,000 million as of March 2010. The company offers a wide range of products including townhouses (43% of total project value), single-detached houses (SDH) (30%), and condominiums (27%). Although the revenue contribution from townhouses in 2009 was lower than in the past, it remained the largest portion of total revenue with a 51% contribution. Revenue from SDHs constituted 30% in 2009. Condominiums generated more revenue in 2009 with a 19% contribution. PS’s cost advantage is derived from employing pre-cast and prefabrication techniques and managing the construction process itself. This enables the company to control construction costs and the construction period efficiently. As a result, PS has been able to offer residential units at competitive prices.
PS’s presales improved consecutively during the past three years, with a growth of 41% to Bt22,775 million in 2009 from Bt16,188 million in 2008. During the first quarter of 2010, presales reached Bt8,587 million, significantly increasing from Bt4,045 million during the same period of 2009. Rising presales reflected the success of new projects. Moving in the same direction as presales, revenue jumped by 46% to Bt18,966 million in 2009 from Bt12,969 million in 2008. The revenue growth was mainly driven by the transfer of several condominium projects in the last quarter of 2009. The company’s profitability has improved as the adjusted operating profit margin was 25%-26% during 2008-2009, up from 20% in 2007. Profitability benefited from economies of scale and government tax incentives. During an aggressive business expansion, PS’s cash flow protection remained strong with the funds from operations (FFO) to total debt ratio at 193.40% as of December 2009. Financial leverage was maintained at the relatively low level of 13.89% at the end of 2009.
TRIS Rating said, the residential property market was volatile in 2009, reflecting the national political instability and the global financial crisis. Although it recovered in the second half of 2009, the market remained relatively slow and has been increasingly dominated by major developers. Most of government tax incentives expired in 2009 and the rest will expire in 2010. Therefore, demand for residential property in 2010 will depend heavily on consumer confidence and the pace of economic recovery. TRIS Rating expects to see demand for residential property in 2010 to gradually recover alongside growth in the domestic economy. -- End
Company Rating: Upgraded to A from A- Issue Ratings: S108A: Bt600 million senior debentures due 2010 Upgraded to A from A- PS121A: Bt1,500 million senior debentures due 2012 Upgraded to A from A- Up to Bt2,500 million senior debentures due within 2015 A Rating Outlook: Stable
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