Bangkok--2 Mar--Fitch rating
Fitch Ratings-Bangkok/Singapore-02 March 2007: Fitch Ratings (Thailand) Limited has today affirmed the ratings of Thailand's MBK Public Company Limited's ("MBK") National Long-term rating at 'A-(tha)' (A minus(tha)) with a Stable Outlook and National Short-term rating at 'F2(tha)'. At the same time, the agency has affirmed the 'A-(tha)' (A minus(tha)) rating of MBK's outstanding senior unsecured debentures.
The ratings reflect MBK's strong market position in the shopping plaza and hotel businesses in Bangkok, the relatively strong and stable cash flow generated from the MBK Center, as well as the expected earnings growth from new investments. The MBK Center's key competitive advantages are its prime location, established brand, strong traffic flows, diversified tenant base and varied target-customer profiles, all of which have helped generate stable cash flow streams (accounting for around two-third of the group's EBITDAR); at the same time these factors have offset the impact of intensifying competition in the shopping plaza business. Over the past three years, MBK's consolidated EBITDAR has stayed in the range of THB1.3 billion to THB1.5bn. With the 30-year land-lease contract of the MBK Center expiring in 2013, the company has first right of refusal on renewing the lease by end-2008, which should mitigate its operating risk to a certain extent.
The ratings also take into account MBK's relatively strong financial position, with the current net debt/last-12-months ("LTM") EBITDAR ratio of 2.1x at end-H107 (the six months ending December 2006), compared to 2.1x at FYE06 (ending June 2006) and 3.0x at FYE05. Its consolidated debt significantly declined to THB3.3bn at end-H107 from THB4.3bn at FYE05, as MBK used a lump sum from the conversion of certain short-term leases at the MBK Center into long-term contracts to repay its debts.
While Fitch expects MBK's long-term net debt/EBITDAR ratio to be in the range 3.0x, the ratio may temporarily increase above this level over the next two years, due to MBK Center's land lease renewal, which could require a large debt-funded upfront payment. During the period of high leverage, Fitch views that MBK's financial flexibility and its liquidity management should remain manageable, supported by its strong and stable cash flows generated from the core businesses. However, substantial debt-funded upfront payment and large investments, which result in worse-than-expected leverage outlook for a prolonged period, could negatively affect the ratings.
Other credit concerns include MBK's exposure to economic cycles and travel shocks, as well as its high level of non-core investments, particularly the equity investment in its finance affiliate, Thanachart Capital Public Company Limited.
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.
Contacts: Soamsiri Chadavadh, Wasant Polcharoen, Vincent Milton; Bangkok, Tel: +662 655 4755
Media Relations: Ching-Yuen Lock, Singapore, Tel: +65 6238 7301; Sylvia McKaige, Singapore, Tel: + 65 6336 6801.