Bangkok--8 Aug--TRIS Rating TRIS Rating Co., Ltd. has assigned an “A” rating to Land & Houses PLC’s (LH) proposed up to Bt2,000 million senior debentures. At the same time, TRIS Rating has affirmed the company rating of LH and the ratings of its current senior debentures at “A”. The rating outlook is “negative”. The ratings reflect LH’s leading position in the residential property market, its well-recognized brand and proven record of providing good quality housing units to customers, and its healthy balance sheet. The ratings also take into consideration the company’s weak operating performance resulting from slowing demand for residential property. The lower-than-expected GDP growth rate, uncertain political situation, and declining consumer confidence remain rating concerns. The “negative” outlook reflects LH’s significant exposure to weakness in the single detached house (SDH) market which is the core segment of the company. The outlook may be revised to “stable” if LH could be able to improve its performance back to normalized level, while further deterioration in its performance could lead to a downgrade. TRIS Rating reported that LH has long been Thailand’s leading residential developer. It was established in 1983 by the Asavabhokhin family. As of March 2007, the Asavabhokhin family held 30.4% of the company’s shares, followed by the Government of Singapore Investment Corporation (GIC) (12.7%). LH’s core products are SDHs which contributed more than 90% of the company’s sales during the last five years, while the balance was from townhouses and condominiums. LH’s competitive advantage stems from its well-accepted brand and reputation in the residential market, its efficient inventory control, and its ability to manage the whole construction cycle. As more than 90% of its sales are from SDHs, LH has been hit hard by the current slowdown in the SDH market. In 2006, LH had total sales of Bt17,620 million, of which Bt16,887 million was from SDHs. The revenue from SDH sales declined 16% from 2005, while volume declined by 20%, less than the 30% decline for the total SDH market for the same period. Though LH’s residential sales slightly recovered during the first three months of 2007, its operating profit continued to decline, by 34% year-on-year, reflecting intense competition in the currently-soft residential market. Despite lower sales and profitability, LH’s balance sheet remains healthy. Its debt-to-capitalization ratio as of March 2007 was 37.8%, slightly improved from 40.7% at the end of 2006. With a land acquisition budget of Bt2,500 million a year and a budget of Bt1,700 million annually to develop properties for rent, LH’s leverage may increase to 40%-50% during 2008-2010. TRIS Rating said that in 2007, LH plans to launch nine new projects, with an average unit price of Bt4.2 million, reflecting a strategic shift towards the medium-priced segment. By the end of 2007, LH’s housing and apartment for rent projects will be in service. However, the revenue contribution from these two projects will be relatively small compared with residential sales. The company also holds a 43% stake in Land and Houses Retail Bank PLC (LH Bank). At the beginning of its operation, LH Bank focuses on housing loans, with 70% of total loan granted to LH Group’s customers, and offers more financing options to increase customer’s affordability. Since it has been operating for only one year, the success of LH Bank and its impact on LH remain to be seen. Political uncertainty has diminished consumer confidence and softened the housing market. Though inflationary pressures and interest rates are easing, TRIS Rating sees that demand for residential property is expected to remain soft in 2007-2008