Bangkok--28 Jun--TRIS Rating TRIS Rating Co., Ltd. has assigned the company rating of Asian Property Development PLC (AP) and the rating of AP’s proposed up to Bt3,000 million senior debentures at “BBB+” with “stable” rating outlook. The ratings reflect the company’s track record in the residential property development, its accepted brand in the downtown townhouse market, and its ability to acquire prime land for development. The ratings also take 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 AP will be able to manage the construction of its condominium projects and transfer in accordance with plans. The company is expected to maintain its conservative financial policy to mitigate increasing business risks since the portfolio is shifting more towards condominium development. TRIS Rating reported that AP was established in 1990 by Mr. Anuphong Assavabhokhin and Mr. Pichet Vipavasuphakorn who together own 36% of the company. During the last four years, AP’s sales averaged Bt5,000 million per year from townhouses (70%-80%), condominiums (11%-15%), and single detached houses (5%-15%). AP’s main competitive edge stems from its discipline to focus on developing downtown residential property and its ability to acquire land in prime locations. The average price for the overall portfolio fell to Bt3.9 million, reflecting a strategic shift towards the medium-priced segment. As of May 2007, the company had 25 residential projects on hand worth Bt31,000 million. In terms of project value, townhouses constituted 45% while condominiums and single detached houses (SDHs) accounted for 35% and 20%, respectively. Due to its strategy to develop more condominium projects, the revenue contribution from condominiums is expected to increase to 40%-50% during the next three years. TRIS Rating said, AP’s residential sales performance for the first three months of 2007 dropped as the market slowed. Revenue from residential sales grew from Bt5,258 million in 2005 to Bt6,344 million in 2006, but slightly dropped to Bt1,415 million for the first three months of 2007, a 9% decrease from Bt1,546 million during the same period of 2006. However, the company successfully launched condominium projects which doubled presales from Bt1,693 million in the first quarter of 2006 to Bt3,541 million in the same period of 2007. AP’s leverage improved in 2006, after peaking in 2005. Its debt to total capitalization ratio decreased from 57% at the end of 2005 to 43% for the first quarter of 2007. However, this ratio is expected to increase when construction begins for recently launched condominium projects. Competition in the residential property market continues to pressure profitability. AP’s operating income before depreciation and amortization as percentage of sales continued to decrease, falling from 31% in 2004 to 17% for the first three months of 2007 since there has been more newcomers entering the townhouse market and higher selling, general, and administrative expenses (SG&A) from condominium launches in recent years. TRIS Rating said, 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.