TRIS Rating Removes “Negative” CreditAlert on “FPT” and Downgrades Its Company & Senior Unsecured Debt Ratings to “A-” from “A”, with “Stable” Outlook

TRIS Rating removes the “negative” CreditAlert implication that has been placed on the company rating and issue ratings of Frasers Property (Thailand) PLC (FPT) since 1 March 2019. At the same time, TRIS Rating downgrades the company’s rating and the ratings on FPT’s outstanding senior unsecured debentures to “A-” from “A” with a “stable” outlook. The downgrades reflect TRIS Rating’s expectation that FPT’s financial risk and business risk will rise after the acquisition of Golden Land Property PLC (GOLD), a residential property developer.

FPT’s leverage will jump as a result of a large debt-funded acquisition of a 94.5% equity stake in GOLD. FPT’s financial leverage as measured by adjusted net debt to earnings before interest, tax, depreciation and amortization (EBITDA) is expected to rise to around 6-8 times in fiscal year (FY) 2019-FY2022 from 4-5 times before the acquisition. In addition, the cyclical and competitive nature of the residential property development industry, GOLD’s main line of business, could have a negative impact on FPT’s business profile.

Nevertheless, FPT has plans to reduce its leverage by selling assets to Frasers Property Thailand Industrial Freehold and Leasehold Real Estate Investment Trust (FTREIT), and selling off non-core assets over the next few years.

The positive effect of the acquisition of GOLD is to significantly increase FPT’s scale of operations and earnings. In our base case forecast, we assume total revenue to reach Bt20 billion after GOLD is fully consolidated in 2019. Revenue is forecast to reach Bt21-Bt23 billion during 2020-2022, and EBITDA to reach Bt6 billion in 2019. We also expect FPT’s EBITDA on a consolidated basis to be Bt6-Bt8 billion in FY2020-FY2022.

After completion of the acquisition of GOLD, FPT will likely continue following the business direction from the Frasers group to develop residential properties for sale and industrial properties for rent. FPT expects to leverage the expertise and support of the Frasers group in developing built-to-suit industrial properties, in enhancing its competency in project management as well as in broadening its customer base.

RATING OUTLOOK

The “stable” outlook reflects the expectation that FPT will be able to maintain its competitive edge and diversified property portfolio. The outlook also reflects our expectation that FPT will successfully integrate GOLD and continue to deliver sound operating performance. We expect the company to continue to be a strategically important subsidiary of Frasers Property Holdings (Thailand) Co., Ltd. (FPHT).

RATING SENSITIVITIES

A credit upside could emerge if FPT delivers better-than-expected operating performance, causing the ratio of the adjusted net debt to EBITDA to fall and sustain at the level prior to the GOLD acquisition. On the contrary, a downside case could occur if FPT’s financial profile weakens further, caused by either a significant deterioration in profitability or a significant further rise in financial leverage.

RELATED CRITERIA

- Rating Methodology – Corporate, 26 July 2019

- Key Financial Ratios and Adjustments, 5 September 2018

- Group Rating Methodology, 10 July 2015

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Frasers Property (Thailand) PLC (FPT)

Company Rating: A-

Issue Ratings:

TICON19OA:Bt620 million senior unsecured debentures due 2019 A-

TICON205A: Bt500 million senior unsecured debentures due 2020 A-

TICON205B: Bt100 million senior unsecured debentures due 2020 A-

TICON208A: Bt600 million senior unsecured debentures due 2020 A-

TICON213A: Bt1,500 million senior unsecured debentures due 2021 A-

TICON217A: Bt800 million senior unsecured debentures due 2021 A-

TICON225A: Bt1,000 million senior unsecured debentures due 2022 A-

TICON229A: Bt1,000 million senior unsecured debentures due 2022 A-

TICON233A: Bt2,500 million senior unsecured debentures due 2023 A-

TICON235A: Bt2,300 million senior unsecured debentures due 2023 A-

TICON238A: Bt700 million senior unsecured debentures due 2023 A-

TICON283A: Bt1,000 million senior unsecured debentures due 2028 A-

FPT213A: Bt2,000 million senior unsecured debentures due 2021 A-

FPT222A: Bt2,300 million senior unsecured debentures due 2022 A-

FPT242A: Bt500 million senior unsecured debentures due 2024 A-

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