Bangkok--29 Jul--TRIS Rating TRIS Rating Co., Ltd. issued an Industry Research report on the Thai construction industry. TRIS Rating views that although the construction value seems to be rising, driven by several public mega-projects, such as mass transit electric-trains, and expectations of industrial capacity expansions, these investments could be delayed due to the current political climate. Rising construction material costs and heightened competition may exert greater pressure on the gross profit margins. Since most construction contracts are fixed prices, contractors are responsible for the rise in construction costs. Therefore, the industry prospects may worsen. Should this happen, profit margins will deteriorate and contractors may suffer losses on the projects already in hand. The credit profiles of the contractors are likely to be negatively impacted. According to the report, TRIS Rating said that the construction and engineering industry in Thailand is large and plays a significant role in driving the economy. In 2007, the investment value in the industry was Bt746,931 million, or about 8% of the country’s gross domestic product (GDP). Currently, TRIS Rating publicly announces credit ratings of three construction companies; Italian-Thai Development PLC (ITD), CH. Karnchang PLC (CK), and Sino-Thai Engineering & Construction PLC (STECON). The criteria that TRIS Rating considers in making a rating assignment are market strength, liquidity and working capital management, the management team and operational strategies, and financial strength. TRIS Rating also said, the negative factors that affected the credit profiles of contractors from 2006 through the first half of 2008 are rising construction costs stemming from higher construction material prices, particularly in steel and steel-related products, and higher diesel prices. In addition, a decline in the number of new public construction projects as a result of political uncertainty together with rising interest rates have added additional pressure to the industry in the past one and a half years.Credit Rating Movements of Large Contractors in TRIS Rating’s Portfolio2004 2005 2006 2007 April 2008 ITD No rating A-/Stable A-/Stable BBB+/Stable BBB+/Stable CK A-/Stable A-/Stable A-/Stable BBB+/Stable BBB+/Stable STECON BBB+/Stable BBB+/Stable BBB-/Stable BBB-/Stable BBB-/StableSource: TRIS RatingFinancial Statistics and Key Financial Ratios ofLarge Contractors in TRIS Rating’s Portfolio Unit: Bt millionITD CK STECON 2006 2007 Jan-Mar 2006 2007 Jan-Mar 2006 2007 Jan-Mar 2008 2008 2008 Revenues 39,817 45,623 11,424 19,208 13,565 2,990 14,707 17,282 3,638 Net income from operations (842) 836 (34) 721 (536) 105 (1,821) (40) 17 Funds from operations (FFO) 1,775 2,967 490 (364) (69) 325 (632) (356) 82 Total assets 50,653 52,985 53,611 30,314 24,476 25,118 15,786 14,027 14,663 Total debt 17,058 18,292 17,790 18,746 14,630 15,820 1,879 1,682 1,733 Shareholders’ equity 14,982 16,817 16,442 4,802 5,691 - 3,909 3,893 3,956 Operating income before depreciation and amortization as % of revenues 3.33 8.62 7.19 5.08 4.19 13.71 (8.81) 3.09 4.41 Pretax return on permanent capital(%) 0.77 7.30 0.89 8.97 2.14 1.46 (27.33) 1.11 0.79 Earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage (times) 2.00 3.40 2.55 2.52 0.97 2.57 (11.93) 6.65 6.63 FFO/total debt(%) 11.60 16.20 2.76 (1.94) (0.47) 2.05 (33.66) 9.85 4.73 Total debt/capitalization(%) 50.57 52.10 51.97 79.61 71.99 74.68 32.46 30.17 30.47Sources: Financial statements of ITD, CK and STECON