Bangkok--10 Aug--Fitch Ratings (Thailand)
Fitch Ratings (Thailand) Limited has today affirmed Asian Property Development Plc’s (“APD”) outstanding senior unsecured debentures, amounting to THB2.6 billion, due 2007 and 2009 at National Long-term ‘BBB(tha)’. At the same time, the agency has affirmed APD’s National Long- and Short-term ratings at ‘BBB(tha)’ and ‘F3(tha)’, respectively. The Outlook is Stable.
The ratings of APD are based on its strong brand recognition, expertise and niche position in Bangkok’s inner-city townhouse development. APD enjoys a relatively lower risk, faster turnover and less intensified competition from its townhouse development, compared with single detached housing (“SDH”) and condominium developers. The ratings also reflect APD’s robust project sales performance and the current strong sales backlog, which in part helps mitigate concerns of an industry-wide slowdown.
APD is exposed to the cyclical nature of residential development business. The sustained high oil prices, rising interest rates and weakening economic growth outlook have now undermined homebuyer confidence, resulting in a substantial slowdown in new housing demand for 2006. In addition, intensified competition and rising construction materials costs continue to put pressure on margins. Other operational risks include the non-recurring nature of its project cash flows and slower inventory turnover as a result of rapid project expansion. Partially mitigating these risks is APD’s focus on liquidity management and a control on finished stocks.
While its funds from operations had been relatively strong over the past three years, APD’s free cash flows (post dividend) remained negative due to a substantial land acquisition and rapid project expansion, as well as a high dividend payout. APD’s net debt-to-EBITDA ratio therefore weakened further to 4.7x at end-2005 (from 2.3x at end-2004 and 1x at end-2003) and remained relatively high at 4x at end-Q106. Nonetheless, the concern is partly mitigated by the company’s manageable debt profile and its moderate liquidity. Of its THB5.2bn debt portfolio at end-Q106, 28% is short-term, while the remainder 72% will gradually mature during 2007-2009. Meanwhile, APD’s liquidity is supported by a cash balance of THB563 million and its remaining undrawn committed credit facilities of THB9bn at end-Q106.
The Stable Outlook reflects the likelihood that APD will be able to maintain its strong business and liquidity position consistent with the current credit metric. Nonetheless, a further weakening in APD’s financial leverage on a sustained basis could negatively affect the ratings.
APD is one of Thailand's leading residential developers, focusing on mid- to upper mid-tier semi-pre-built townhouse development in Bangkok and partly on condominium and SDH projects. APD is listed on the Stock Exchange of Thailand, with two families holding a majority stake of 35%.
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.
CONTACT: Wasant Polcharoen, Bangkok, Tel: +662 655 4763; Lertchai Kochareonrattanakul +662 655 4760; Vincent Milton +662 655 4759.
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