Bangkok--23 May--TRIS Rating
TRIS Rating Co., Ltd. has upgraded the company and current issue ratings of Central Pattana PLC (CPN) to “A+” from “A”. At the same time, TRIS Rating has assigned a “A+” rating to CPN’s proposed up to Bt3,000 million senior debentures. The outlook remains “stable”. The ratings reflect CPN’s leading position in the Thai retail property development industry, its proven record in managing high-quality shopping centers, and reliable cash flow from contract-based rental and service income. The ratings also take into consideration CPN’s aggressive expansion plans, which will require substantial capital expenditures during the next few years, and the slowdown in Thailand’s economic growth as a result of uncertain political situation and lower consumer confidence.
The “stable” outlook reflects CPN’s ability to maintain its market position in the retail property industry by developing new projects and acquiring existing shopping centers. Despite substantial capital expenditures planned for 2007-2010, CPN is expected to continue its conservative financial policy by maintaining the target net debt to equity ratio at less than one times in the medium term.
TRIS Rating reported that CPN is the largest retail property developer in Thailand. Since 2003, the company’s retail space expanded at an average of 6.5% per annum, while the total supply of retail space in the Bangkok Metropolitan Area grew by an average of 4.2% per annum. Currently, the company operates 10 shopping centers in Bangkok and other big cities in Thailand. With total retail space of 691,695 square meters (sq.m.), CPN is ranked number one, with a 28% market share. CPN’s major shareholders are the Chirathivat family (34%) and Central Holding Co., Ltd. (27%), the leading retailer in Thailand. The ownership link with the Central Group is seen as a benefit for the company since Central Department Store has been a strong anchor for the company’s shopping centers.
TRIS Rating said, CPN’s solid operating performance is attributable to high occupancy rates and healthy same store sales growth for its shopping centers. As of March 2007, the occupancy rate of its 10 shopping centers averaged 95.5%, up from 93.1% and 92.4% in 2005 and 2006, respectively. This is mainly the result of the improving occupancy rates at CentralWorld and CentralPlaza Ram Indra. Since the opening of the offices@CentralWorld , CPN’s revenue from office buildings has increased sharply, from Bt233 million in 2004 to Bt733 million in 2006. The company’s growth strategy will require significant capital expenditures of approximately Bt5,500-Bt7,500 million per annum during the next three years. The company expects four new shopping centers to be completed by 2009, which will partly mitigate the contract renewal risk of the land lease agreement for CentralPlaza Ladprao with the State Railway of Thailand (SRT).
The current slowdown in GDP growth has lowered consumer confidence and spending. The retail sales index slightly decreased in the first two months of 2007, while the consumer confidence index has now been below 100 for 33 months. However, CPN will not be immediately affected by these factors, as tenants have three-year rental contracts, said TRIS Rating.