Bangkok--8 Sep--TRIS Rating
TRIS Rating Co., Ltd. has upgraded the company rating of Noble Development PLC (NOBLE) and the rating of NOBLE’s Bt1,000 million senior debentures (NOBL06NA) to “BBB+” from “BBB” with “stable” outlook. The ratings reflect NOBLE’s accepted brand in the medium- to high-end residential market, its ability to maintain profit margins, and improving balance sheet. The ratings also take into consideration NOBLE’s pre-built single detached houses (SDH) inventories, and slowing demand for residential property as a result of lower consumer confidence, rising interest rates, and construction costs.
The “stable” outlook reflects the expectation that NOBLE will be able to maintain its performance in both the SDH and condominium markets. NOBLE is expected to sustain its favorable profit margins and acceptable cash flow protection. The company is anticipated to continue its conservative financing policy for developing its property development projects in the medium term.
TRIS Rating reported that NOBLE is a medium-sized property developer, focusing on development of SDH and condominium projects for middle- to high-income customers. The company’s competitive advantage is its recognized brand as a modern residential developer. NOBLE has continuously introduced unique designs for SDH and condominium projects to the market. The company’s operating performance in 2005 was satisfactory. Sales increased from Bt1,770 million in 2004 to Bt2,506 million in 2005 following the transfer of the “Ora” condominium project to customers. For the first half of 2006, condominium sales increased significantly from the success of its new condominium project “Remix” though the company’s
SDH sales slowed. Gross profit was maintained at 40% in 2005 and in the first half of 2006 while its debt to capitalization ratio improved from 46% in 2004 to 41% in 2005 and 38% as of June 2006. Looking forward, Noble’s leverage may increase slightly due to the company’s increasing exposure to condominium development.
TRIS Rating said, the current slowdown of the Thai economy and an uncertain political situation are likely to unfavorably affect the residential property market as some homebuyers are likely to delay decisions to buy new houses. Competition in the housing market is expected to intensify in 2006-2007 as housing units continue to be offered to the market while demand has been moderating. Increasing construction material costs, together with rising interest rates, will put more pressure on developers’ margins. The tighter lending policies adopted by commercial banks will likely limit developers’ expansion plans, while rising interest rates will likely soften housing demand.