Bangkok--28 Oct--Fitch Rating
Fitch Rating (Thailand) Limited has affirmed Asian Property Development Public Company Limited’s (APD) National ratings at Long-Term ‘BBB+(tha)’ with Stable Outlook and Short-Term ‘F2(tha)’.
The ratings reflect APD’s strong presence in the development of condominiums and townhouses in Bangkok Metropolitan Area (BMA). In addition, the strong brands and prime location of APD’s projects enable the company to maintain robust presales and gross profit margin.
APD’s project portfolio has diversified over the past three years. A sizable addition of lower-income townhouse and luxury single-detached-house projects to its portfolio is likely to help strengthen the company’s presales in 2011-2012. Higher numbers of low-rise projects should also help smooth APD’s earnings in 2011-2013 due to their short cash conversion cycle compared with high-rise projects.
Although presales were strong in H111 with yoy growth of 44%, presales in H211 are likely to be dampened by the risk of floods threatening BMA in Q411. This could cause overall presales in 2011 to decline from a high base in 2010. However, Fitch believes APD’s presales will recover once the floods recede. Presales in 2012 are likely to be supported by a diverse project portfolio and new project launches.
Fitch expects APD’s financial leverage, as measured by net debt to inventory, to increase in 2011-2012 due to continued large land acquisition to support expansion of low-rise projects and construction of several condominiums. Successful new low-rise projects, as well as discretionary land acquisition and dividend policy, are key factors in keeping financial leverage consistent with current ratings.
APD’s credit profile is constrained by the cyclical nature of residential property development, which usually results in volatile cash flow from operations. Key operating risks include rising interest rates, high inflation, increasing prices and scarcity of land in prime locations, growing supply of condominiums, and intense competition.
Negative rating pressure could result from weaker-than-expected presales or aggressive project expansion and land acquisition leading to deterioration in interest coverage or sustained increase in financial leverage, as measured by net debt to inventory, over 50%. Fitch considers an upgrade, which is contingent on an improved business and financial profile, as unlikely in the next 12-18 months.
Contact:
Primary Analyst
Pimrumpai Panyarachun
Associate Director
+66 2 655 4752
Fitch Ratings (Thailand) Limited
Wave Place 13th Fl.
Wireless Road, Lumpini, Patumwan
Bangkok 10330
Secondary Analyst
Somruedee Chaiworarat
Associate Director
+662 655 4762
Committee Chairperson
Vicky Melbourne
Senior Director
+612 8256 0325
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Additional information is available at www.fitchratings.com. The ratings above were unsolicited and have been provided by Fitch as a service to investors. The issuer did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
Applicable criteria, ‘Corporate Rating Methodology’, dated 12 August 2011, and ‘National Rating Criteria’, dated 19 January 2011, are available on www.fitchratings.com.