Bangkok--15 Sep--Fitch Ratings Fitch Ratings (Thailand) Limited has today affirmed Asian Property Development Public Company Limited’s (APD) National Long-term rating at ‘BBB(tha)’with a Stable Outlook and National Short-term rating at ‘F3(tha)’. At the same time, the agency has affirmed APD’s National Long-term rating on its senior unsecured debentures No.1/2003, due 2009, at ‘BBB(tha)’. The ratings are based on APD’s strong brand recognition, expertise and solid market position in Bangkok’s inner-city townhouse segment, along with its strengthened position in the condominium segment following the successful launch of many condominium projects in 2007. APD has strong performance in project sales, as evidenced from a substantial increase in sales backlog to THB17.5bn at end-August 2008 from about THB7.0bn at end-2006. The company also shows consistently strong margins on its condominium sales, which should mitigate concerns over an industry-wide slowdown and a more challenging operating environment in 2008. The ratings also take into account APD’s continued substantial cash outflow to fund land acquisition and the construction of new projects given a rapid high-rise expansion in 2007/8, which could result in an increase in the company’s net debt over the next two years. Partially mitigating these risks is APD’s focus on cash flow management, as well as its manageable debt and liquidity profile. Meanwhile, with expected stronger EBITDA growth, APD’s financial leverage measured by net debt to EBITDA ratio will likely stay in the moderate range of 3.0x-3.5x during 2008-10. APD’s EBITDA sharply increased by 125% yoy to THB979m in H108, thanks to its strong recognition of condominium sales backlog and improved margins. APD also expects strong performance in H208 given its scheduled recognition of condominium sales backlog and more low-rise project launches. APD’s free cash flows (post dividend), however, remained weak in H108 given an increase in its working capital requirements for project expansion and land acquisition. At end-H108, APD’s net debt increased to THB5.8bn (at end-2007; THB4.8bn) which was equivalent to 2.9x of its last-12-month EBITDA (end-2007; 3.3x). Meanwhile, APD’s liquidity remains adequate, supported by a cash balance of THB920m and its remaining undrawn committed credit facilities of THB10.5bn at end-H108. Fitch notes that APD is exposed to the cyclical nature of the residential development business where an economic slowdown, as a result of continued political uncertainty and high oil prices environment, has undermined homebuyer confidence and impacted overall housing demand in 2006/7; although the government’s one-year homebuyer incentive programme, implemented in late-March 2008, should to a degree mitigate risk of further industry deterioration. Other operational risks include the non-recurring nature of APD’s project cash flows and a possibility of seeing customer post-financing rejection rates on its condominium projects rise in light of the current economic environment. The Stable Outlook reflects the likelihood that APD will be able to maintain its strong business profile and liquidity position consistent with the current credit metric, in light of its planned aggressive expansion and a more challenging operating environment. Meanwhile, continued robust sales of new launches with high margins in light of the weakening economic environment, as well as its moderate land acquisition, over the next 12-18 months, could trigger a positive rating action. Conversely, significantly weaker-than-expected operating performance and liquidity profile, as well as worse-than-expected industry declines could negatively impact the ratings. Contacts: Wasant Polcharoen, Somruedee Chaiworarat, Vincent Milton, Bangkok, +662 655 4755. Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.