Bangkok--24 Apr--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the company rating of Supalai PLC (SPALI) at “BBB+” with “stable” outlook. The rating reflects the ability of SPALI to control operating costs, its long track record in the residential development market, and an accepted brand name in the single detached house (SDH) and condominium markets. The rating also takes into consideration a cyclical downturn in the property development market, slowing demand for residential property due to the uncertain political situation and declining consumer confidence.
The “stable” outlook reflects the expectation that SPALI will be able to complete the construction of its condominiums as planned. As it has been successful in controlling costs and has a healthy balance sheet, SPALI should be able to weather the downturn in the residential market. The company is expected to maintain its conservative financial policy and keep the debt to capitalization ratio at less than 50% in the medium term.
TRIS Rating reported that SPALI was established in 1989 and is one of Thailand’s leading property developers. The company has developed SDH, townhouse, and condominium projects in the Bangkok metropolitan area (BMA) and upcountry. Its products focus on the middle-income market with prices ranging from Bt1-Bt10 million per unit. SPALI’s competitive edge stems from its ability to control operating costs and to offer housing units at competitive prices in various locations.
TRIS Rating said, in 2006, SPALI’s operating performance remained satisfactory, though its residential pre-sales decreased slightly from Bt7,321 million in 2005 to Bt7,226 million in 2006, primarily as a result of the sluggish market. In 2006, SPALI was able to sell 2,394 residential units, 1,711 condominium units, and 683 SDH and townhouses. The average price per unit increased from Bt2 million in 2005 to Bt3 million in 2006. Revenue increased from Bt3,441 million in 2005 to Bt4,598 million in 2006. Profitability remained favorable since operating profit margins averaged 28%-31% for the last two years, leading to pre-tax returns on permanent capital of around 15%-25%. SPALI has been able to keep its financial leverage at an acceptable level, though its project portfolio has grown significantly in recent years.
Political uncertainty has further deteriorated consumer confidence and softened the housing market. Though inflationary pressures and interest rates are easing, demand for residential property is expected to remain soft in 2007-2008, said TRIS Rating.
Supalai PLC (SPALI)
Company Rating: Affirmed at BBB+
Rating Outlook: Stable