Bangkok--19 Oct--TRIS Rating TRIS Rating has affirmed the company rating of Quality Houses PLC (QH) and the ratings of its existing debentures at “BBB+”. At the same time, TRIS Rating has assigned the rating of QH’s proposed up to Bt5,000 million senior debentures at “BBB+”. The rating outlook is “stable”. The ratings reflect the company’s long track record in the property market, its strong brand name in the medium to high residential property, and recurring income from serviced apartments and office buildings. The ratings also take into consideration the company’s highly-leveraged balance sheet, aggressive expansion plans and the cyclical nature of the property development market. The slowdown in demand for residential property, uncertain political situation and declining consumer confidence remain rating concerns. The “stable” outlook reflects the expectation that QH will be able to maintain its leading position in the residential property market. Recurring income from serviced apartments and office buildings is expected to provide ample cushion for the company during downturn in the residential property market. TRIS Rating reported that QH is one of the leading property developers in Thailand. It was established in 1983 by Land & Houses PLC (LH). As of April 2007, its major shareholders were LH together with the Asavabhokhin family (29%), the Government of Singapore Investment Corporation Pte. Ltd. (14%) and the Thailand Prosperity Fund (8.5%). For the first half of 2007, housing sales accounted for 88% of QH’s total revenue with the remainder derived from its serviced apartments (9%) and office space for rent (3%). The company’s performance for the first six months of 2007 was satisfactory. While the overall residential market in the Bangkok Metropolitan Area (BMA) in the first six month of 2007 dropped by 10%, QH’s housing sales increased by 52% for the same period. This was due mainly to the contribution from mid-priced housing units from its recently-launched Casa Ville and Casa City projects. After transferring two office buildings to Quality House Property Fund (QHPF), the company’s recurring income from serviced apartments and office buildings dropped by 11%. However, this will be partially mitigated by property management fee income from QHPF and dividends QH will receive from its 25% stake in QHPF. TRIS Rating said that as of June 2007, QH’s total debt had increased to Bt12,229 million and its debt to capitalization ratio had deteriorated to 60% from 52% at the end of 2006. The increased debt was due to substantial investments to ensure the company had sufficient stock to meet the expected increase in demand. Operating profit margins improved to 17% in the first half of 2007 from 12% in 2006. However, pretax return on permanent capital and funds from operations (FFO) to total debt deteriorated in the first half of 2007 due to increasing debt from QH’s project expansion. Political uncertainty has diminished 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.