TRIS Rating Assigns “BBB+” Rating to Senior Unsecured Debt Worth Up to THB2 Billion of “SC”, with “Stable” Outlook

Stocks News Friday June 9, 2023 12:17 —TRIS News Release

TRIS Rating affirms the company rating on SC Asset Corporation PLC (SC) and the ratings on its outstanding senior unsecured debenture at ?BBB+? with a ?stable? rating outlook. At the same time, TRIS Rating assigns the ?BBB+? rating to SC?s proposed issue of up to THB2 billion senior unsecured debentures due within four years. The proceeds from the new debentures are to be used to repay some of its existing loans and fund its working capital.

The ratings reflect SC?s strong position in the mid- to high-end segments of the residential property market, continued revenue growth, and anticipated rise in its financial leverage, resulting from increasing new project launches and expansion toward recurring income assets. The ratings are weighed down by the cyclical nature of the residential property industry and our concerns over the reimposition of the loan-to-value (LTV) rules and interest rate hikes which could negatively impact demand for housing in the short to medium term.

SC?s operating performance in 2022 through the first quarter of 2023 was in line with TRIS Rating?s expectations. The company?s revenues have continued to grow gradually over recent years. Revenue in 2022 and the first quarter of 2023 stood at THB21.7 billion and THB4.9 billion, increasing by 11% year-on-year (y-o-y) and 28% y-o-y, respectively. Revenue from landed property projects accounted for 75%-80% of total revenue with the remainder from condominiums and rental and service income.

As of March 2023, SC had a backlog worth THB10.9 billion. Of which, around THB7.8 billion is expected to be transferred in the remainder of 2023, THB2.0 billion in 2024, and the rest over the next two years. Over the last three years, SC has maintained its the earnings before interest, taxes, depreciation, and amortization (EBITDA) margin in the 17%-18% range. This ratio was 18.6% in the first quarter of 2023. We expect SC to maintain its good operating performance and sustain its EBITDA margin in this range over the next three years.

We assess SC?s financial leverage as moderately high. The debt to capitalization ratio at the end of March 2023 was 55.4%, constant from 2022. We project this ratio to range between 55%-60% over the next three years. This is based on its plan to launch new residential property projects worth THB20-THB30 billion per annum and invest in recurring income assets at THB2.0-THB2.6 billion per annum over the next three years. SC?s bank loans and debentures have a key financial covenant stipulating that the company must maintain its interest-bearing debt to equity ratio below 2 times. As of March 2023, the ratio was 1.3 times. Its priority debt to total debt ratio at the end of March 2023 was 28%.

We assess SC?s liquidity as manageable over the next 12 months. As of March 2023, the company?s liquidity sources comprised cash on hand of THB2.1 billion and unused committed credit facilities of THB7.7 billion. We forecast SC?s funds from operations (FFO) over the next 12 months to be THB2.4-THB2.6 billion. SC has THB15.9 billion in maturing debts due over the coming 12 months, comprising THB6.1 billion in short-term loans, THB5.7 billion in project loans, and THB4.2 billion in debentures. Short-term loans are mostly for working capital and bridging loans for land purchases which are expected to be converted into project loans over time. The company?s project loans will be repaid with cash received from the transfer of completed units to customers while most of its maturing debentures will be refinanced with issuances of new debentures.


The ?stable? outlook reflects our expectation that SC will maintain its competitive position and financial profile in the medium term, with the FFO to debt ratio remaining at 8%-10%. Despite its aggressive business expansion plan, we expect SC to keep its debt to capitalization ratio in the 55%-60% range over the next three years.


We could revise SC?s rating and/or outlook downward should its operating performance or financial profile deteriorate significantly from current levels, causing its debt to capitalization ratio to rise above 60% and/or FFO to debt ratio to drop below 5% over a sustained period. In contrast, we could revise the ratings upward if its revenue base grows as targeted while FFO to debt ratio improves to around 10%-15% and the debt to capitalization ratio stays around 50%-55% on a sustainable basis.


- 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

SC Asset Corporation PLC (SC)

Company Rating: BBB+

Issue Ratings:

SC257A: THB2,000 million senior unsecured debentures due 2025 BBB+

SC261A: THB920 million senior unsecured debentures due 2026 BBB+

SC271A: THB1,280 million senior unsecured debentures due 2027 BBB+

Up to THB2,000 million senior unsecured debentures due within 4 years BBB+

Rating Outlook: Stable

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