TRIS Rating Assigns “A” Ratings to “TICON’s” Proposed Senior Debentures Worth Up to Bt900 Million

TRIS Rating Co., Ltd. has assigned the ratings of “A” to the proposed issues with a combined value of up to Bt900 million in senior debentures of TICON Industrial Connection PLC (TICON). At the same time, TRIS Rating has also affirmed the company rating and current senior debenture ratings of TICON at “A”. TRIS Rating has also continued to place a “negative” CreditAlert to reflect the likelihood impact of the severe flooding in late 2011 on TICON’s credit worthiness.

The “A” ratings reflect TICON’s leading position in the ready-built factory (RBF) industry, recurring cash flows from contractual rental income from factories and warehouses, and strong operating performance. The rating concerns include the economic slowdown in major developed countries and the deterioration in investor confidence after the recent flood crisis in Thailand. The CreditAlert with “negative” implication is based on the expected deterioration in TICON’s credit profile after the flood crisis. The ratings could be maintained should the company demonstrate an ability to rebuild its rental income close to its normal level. However, the ratings could be downgraded if TICON requires a longer time to restore its operation and financial strength.

TRIS Rating reported that TICON is the leading RBF provider in Thailand. It was established in 1990 and listed on the Stock Exchange of Thailand (SET) in 2002. The company has expanded its business scope and provided warehouse space for rent since 2005. As of December 2011, the company’s portfolio comprised 137 leased factories and 52 leased warehouses, located in major industrial estates nationwide, with a total leased space of 592,867 square meters (sq.m.). During the past five years, the major portion of revenue (66%) came from selling assets to property funds, while 26% of total revenues were generated by rental factories and warehouses. Revenues from assets sold to TICON Property Fund (TFUND) and TPARK Logistics Property Fund (TLOGIS) were approximately Bt1,900 million per year between 2006 and 2010.

In the first nine months of 2011, TICON’s operating performance was considered strong. Total income increased by 128.2% to Bt1,814 million, driven by higher rental income and sales of warehouses to TLOGIS. Total rental income rose by 8.3% over the same period of last year to Bt705 million. Before warehouses sold to TLOGIS, total leased area was very healthy at 569,255 sq.m., up by 42.2% from the end of 2010. In September 2011, TICON sold 55,230 sq.m. of leased warehouses worth Bt944 million to TLOGIS. As of September 2011, total debt was Bt6,539 million and the total debt to capitalization ratio remained flat at 52.8% at the end of September 2011.

Due to the heavy flooding in October and November 2011, TICON announced that some of its factories and warehouses for rent were flooded. The affected buildings were located in Rojana Industrial Park, Hi-Tech Industrial Estate, Bangpa-in Industrial Estate, Navanakorn Industrial Promotion Zone, and Wang Noi district. Total 70 factories and 12 warehouses covering 266,074 sq.m. were flooded. As of December 2011, TICON’s total leased area was 592,867 sq.m. spread across 13 locations. The flooded areas accounted for 38% of TICON’s total leased areas and contributed 38% of monthly rental income. The loss of rental income will be partly compensated by the business interruption insurance. The repair cost, which is expected to be around Bt220 million will be mostly compensated by insurance companies. As a result of flooding, TICON has postponed the sale of 71,050 sq.m., worth Bt1,500 million, of RBFs to TFUND into 2012. The loss of rental revenue (38% of total) of up to six months and the delay of sales of factories to TFUND due to the flood will weaken TICON’s financial profile in the short term, said TRIS Rating. -- End

CREDITALERT DESIGNATION: NEGATIVE Company Rating: Affirmed at A Issue Ratings: TICON128A: Bt650 million senior debentures due 2012 Affirmed at A TICON165A: Bt650 million senior debentures due 2016 Affirmed at A Up to Bt100 million senior debentures due within 2017 A Up to Bt800 million senior debentures due within 2017 A TRIS Rating Co., Ltd./www.trisrating.com Contact: [email protected], Tel: 0-2231-3011 ext 500/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand Copyright 2012, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.