TRIS Rating affirms the company rating on AP (Thailand) PLC (AP) and the ratings on AP?s outstanding senior unsecured debentures at ?A-? with a ?positive? rating outlook. At the same time, TRIS Rating assigns the rating of ?A-? to AP?s proposed issue of up to THB3 billion in senior unsecured debentures due within four years. The company plans to use the proceeds from the new debenture issuance to repay some of its existing loans and fund business expansion.
The ratings reflect AP?s strong market position and the expectation that the company will sustain its revenues and earnings growth momentum, as well as its large and diverse product lines and substantial shared profits from joint-venture (JV) projects. The ratings also take into consideration our concerns over increased construction costs and rising interest rates which could negatively impact AP?s profit margins in the short to medium term.
AP demonstrated strong operating performance in 2022. Its presales (including projects under JV) peaked at THB50.4 billion, jumping 44% year-on-year (y-o-y). Revenue in the first nine months of 2022 rose 22% y-o-y to THB29.8 billion, achieving almost 85% of our full-year forecast. Around 92% of total revenues came from the landed property segment with the remainder from condominium sales and management fees and service income.
As of September 2022, AP had a total backlog (including backlog of JV) worth THB29.1 billion. Around THB8-THB9 billion of the backlog is expected to be transferred in the remainder of 2022 and the rest in the next two years. The earnings before interest, taxes, depreciation, and amortization (EBITDA) margin has held steady at 19%-20% over the past three years. This ratio improved to 21% in the first nine months of 2022. We expect AP to keep its EBITDA margin in this range over the next three years.
AP?s financial leverage has gradually declined over the past three years. The debt to capitalization ratio (including 51% of JV debts) at the end of September 2022 was 39.3%, down from 42.8% in 2021, 46.6% in 2020, and 56.5% in 2019. The debt to EBITDA ratio stood at 2.98 times while the ratio of funds from operations (FFO) to debt was 25.4% in the first nine months of 2022, improving from 3.81 times and 19.9%, respectively, in 2021.
The financial covenants on bank loans and debentures require AP to keep its net interest-bearing debt to equity ratio below 2 times. The ratio at the end of September 2022 was 0.5 times. Thus, the company should have no problem complying with the covenants. Its priority debt to total debt ratio as of September 2022 was also low at 6%.
We assess AP to have adequate liquidity over the next 12 months. At the end of September 2022, the company?s liquidity sources comprised cash on hand of THB2 billion and available credit facilities of THB8.4 billion. AP?s FFO is expected to be in the THB5.0-THB5.2 billion range. AP?s uses of funds over the next 12 months will amount to THB6.2 billion, comprising repayments of THB1.5 billion for short-term loans, THB0.1 billion for financial leases, and THB4.6 billion for maturing debentures.
RATING OUTLOOK
The ?positive? outlook reflects our expectation that AP will maintain its strong market position in both the landed property and condominium segments. The company is expected to sustain its revenues and earnings growth momentum while its debt to capitalization ratio should remain at around 45%.
RATING SENSITIVITIES
The ratings and/or outlook could be revised upward should AP?s financial profile improve such that its debt to capitalization ratio declines to the 40%-45% range and FFO to debt ratio improves to around 20% on a sustained basis. In contrast, the ratings could be revised downward should the company?s financial profile deteriorate significantly from the current level, causing its debt to capitalization ratio to stay above 55% and FFO to debt ratio to drop below 10% for an extended period.
RELATED CRITERIA
- Homebuilders and Real Estate Developers Rating Methodology, 12 January 2023
- Corporate Rating Methodology, 15 July 2022
- Key Financial Ratios and Adjustments for Corporate Issuers, 11 January 2022
- Issue Rating Criteria, 15 June 2021
AP (Thailand) PLC (AP)
Company Rating: A-
Issue Ratings:
AP238A: THB1,230 million senior unsecured debentures due 2023 A-
AP238B: THB400 million senior unsecured debentures due 2023 A-
AP241A: THB2,500 million senior unsecured debentures due 2024 A-
AP247A: THB1,500 million senior unsecured debentures due 2024 A-
AP248A: THB770 million senior unsecured debentures due 2024 A-
AP251A: THB2,000 million senior unsecured debentures due 2025 A-
AP251B: THB1,000 million senior unsecured debentures due 2025 A-
AP257A: THB2,000 million senior unsecured debentures due 2025 A-
AP258A: THB850 million senior unsecured debentures due 2025 A-
AP261A: THB1,500 million senior unsecured debentures due 2026 A-
AP267A: THB500 million senior unsecured debentures due 2026 A-
Up to THB3,000 million senior unsecured debentures due within 4 years A-
Rating Outlook: Positive