Bangkok--Jan 7--Fitch Ratings (Thailand)
Fitch Ratings (Thailand) Limited has upgraded the Long-term National rating of the THB3,614.5 million partially secured amortising notes of Robinson Department Store Public Company Limited (“Robinson”) to ‘BBB-(tha)’ (BBB minus(tha)) from ‘BB(tha)’. The Outlook on the rating is Stable.
The upgrade reflects the lower refinancing risk and the company’s improved operating performance and profitability, helped by the success of its repositioning programme. The rating also reflects the ongoing commitment and strong support from the Central Retail Corporation (“CRC”) group. The rating takes into account concerns about intensifying competition from foreign retailers, the economic impact of high oil prices and rising interest rates which may impact consumer confidence, as well as Robinson’s future expansion risks.
Robinson’s nationwide brand relaunch in 2003, including a new store logo and advertising campaign, supported its first double-digit sales growth (14.5% in the first nine months of 2004 (“9M04”)) since 1996. Meanwhile, the group was able to maintain its gross margin at 22% in 9M04, up from below 20% in 2001, thanks to its ongoing remerchandising efforts. EBITDA for 9M04 increased by 12.8% yoy to THB855m, equivalent to 80.6% of FY03’s full-year EBITDA, while Selling and Administrative expense (“SG&A”) as a percentage of sales declined to 26% in 9M04 from 29% in 9M03.
Robinson plans to open at least one new store in Bangkok in 2005 and is negotiating to open two more in 2006, budgeted at THB150m and THB300m respectively. These are its first expansion plans since it began its rehabilitation programme. Robinson intends to rent retail space, rather than owning and building its own stores.
At end-9M04, the net debt to last-twelve-month (“LTM”) EBITDA ratio declined to 1.3x, from 2.3x at end-9M03, while the LTM EBITDA to principal and interest expenses ratio strengthened to 3.2x from 2.7x, due to a debt repayment and improved operating performance. In 9M04, 76% of its outstanding notes had been repurchased via the Voluntary Debt Refinance Programme (“VDRP”). Given that, Robinson now has the right to force the remaining note holders to tender prior to December 2005, when the VDRP expires. In fact, Robinson believes, the issue will likely be concluded mid-2005, as soon as the company finalises the terms of the long-term refinancing loan which will replace the bridging loan currently used for the note repurchase. Fitch notes that Robinson’s refinancing risk is mitigated by the implementation of the VDRP and the expected successful arrangement of the long-term loan refinancing.
A credit update report on Robinson Department Store Plc. is available on the agency’s subscription web site, www.fitchresearch.com.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries where the sovereign’s foreign and local currency ratings are below ‘AAA’. National ratings are not internationally comparable since the best relative risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. They are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. A rating Outlook indicates the direction a rating is likely to move over a one to two-year period.
CONTACT: Tanawat Roongtanapirom, CFA, Analyst, Corporates +662 655 4758; Orawan Karoonkornsakul, CFA, Director, Corporates Tel: +662 655 4766; Vincent Milton, Managing Director, Tel: +662 655 4759. End.