TRIS Rating Co., Ltd. has affirmed "BBB" ratings to Golden Land Property Development PLC's (GOLD) senior secured debentures each valued at Bt1,100 million (GOLD05OA and GOLD088A. The ratings reflect GOLD's well-accepted brand name in the high-end residential segment and recurring income from its high-rise rental projects. The strengths are partially offset by GOLD's higher leverage and relatively low cash flow protection. Industry risks resulting from the cyclical nature of the real estate industry, increasing interest rates, and rising construction costs are concerns. The ratings also take into consideration the land and buildings pledged as collateral, which are valued at least 1.89 times the outstanding debentures for GOLD05OA and at 1.34 times the outstanding debentures for GOLD088A throughout the life of the debentures.
The "stable" outlooks reflect the expectation that GOLD will be able to maintain its performance in residential, serviced apartment, and rental office markets in line with TRIS Rating's expectation in the medium-term, despite lower-than-expected performance during the first half of 2004. The demand trends for housing, serviced apartments, and rental offices are expected to be favorable due to the solid economic situation.
TRIS Rating reported that GOLD is a medium-sized real estate developer focusing on the high-income segment in both the single detached house (SDH) and high-rise residential markets. GOLD successfully established its brand name in high-end SDH market and developed four SDH projects, priced between Bt8-Bt15 million per unit. Currently, it has three SDH projects, valued at Bt9,000 million, including Golden Legend Sathorn, Golden Nakara Srinakarin, and Golden Heritage Pinklao. The company plans to penetrate the medium-income segment by launching a new SDH project, Golden Monaco Bangna, priced between Bt5-Bt10 million per unit. GOLD's success in developing its SDH projects is mainly attributable to the ability of management to acquire land in prime locations. Currently, GOLD has approximately 730 rai of land to support its growth for the next 2-3 years.
For its high-rise projects, GOLD operates two serviced apartments, Mayfair Marriott Executive Apartment and the Ascott Sathorn. GOLD's success in serviced apartment projects comes from its experienced strategic partners, the Ascott and Marriott groups. GOLD also re-opened its Goldenland office building (9,160 square meters of rentable area) in the central business district (CBD). GOLD's recurring rental income, which contributed 5% to total income in the first 6 months of 2004, is expected to increase in the future. GOLD's development policy for high-rise projects is flexible, depending on its requirement for trading income or recurring income. GOLD sold two serviced apartments in 2003, the Kallista Residences and Somerset. The Sky Villas, a 128-unit lease-hold condominium, was placed on the market in the beginning of 2004, and 80% of the units have been sold. GOLD plans to launch a new high-end condominium located at the corner of the Sathorn-Narathiwatrajanakarin intersection by the end of 2004.
TRIS Rating said that GOLD's debt significantly increased to Bt6,807 million at the end of June 2004 from Bt3,097 million at the end of 2002, due mainly to the acquisition of huge amounts of land during 2003. At the end of June 2004, its total debt to capitalization ratio increased to 55.6% from 54.4% and 41.0% at the end of 2003 and 2002, respectively. GOLD's cash flow protection deteriorated over the past years, mainly due to higher levels of debt. Its EBITDA interest coverage ratio decreased from 4.3 times in 2003 to 1.5 times in the first six months of 2004, while non-annualized funds from operations to total debt ratios significantly declined from 8.9% in 2003 to -0.4% in the first six months of 2004. For the coming years, GOLD's liquidity is expected to be tight and its debentures (GOLD05OA), which will expire in 2005, may need to be refinanced.
TRIS Rating also said that the real estate industry is highly cyclical, exhibiting much greater volatility than the general economy. Demand for housing is expected to grow for the next few years due to the favorable national economy. Increasing interest rates, oil prices, and construction costs could adversely affect real estate demand and operators' margins. -- End
Golden Land Property Development PLC (GOLD)
Issue Ratings:
GOLD05OA: Bt1,100 million senior secured debentures due 2005 Affirmed at BBB
GOLD088A: Bt1,100 million senior secured debentures due 2008 Affirmed at BBB
Rating Outlook: Stable
The "stable" outlooks reflect the expectation that GOLD will be able to maintain its performance in residential, serviced apartment, and rental office markets in line with TRIS Rating's expectation in the medium-term, despite lower-than-expected performance during the first half of 2004. The demand trends for housing, serviced apartments, and rental offices are expected to be favorable due to the solid economic situation.
TRIS Rating reported that GOLD is a medium-sized real estate developer focusing on the high-income segment in both the single detached house (SDH) and high-rise residential markets. GOLD successfully established its brand name in high-end SDH market and developed four SDH projects, priced between Bt8-Bt15 million per unit. Currently, it has three SDH projects, valued at Bt9,000 million, including Golden Legend Sathorn, Golden Nakara Srinakarin, and Golden Heritage Pinklao. The company plans to penetrate the medium-income segment by launching a new SDH project, Golden Monaco Bangna, priced between Bt5-Bt10 million per unit. GOLD's success in developing its SDH projects is mainly attributable to the ability of management to acquire land in prime locations. Currently, GOLD has approximately 730 rai of land to support its growth for the next 2-3 years.
For its high-rise projects, GOLD operates two serviced apartments, Mayfair Marriott Executive Apartment and the Ascott Sathorn. GOLD's success in serviced apartment projects comes from its experienced strategic partners, the Ascott and Marriott groups. GOLD also re-opened its Goldenland office building (9,160 square meters of rentable area) in the central business district (CBD). GOLD's recurring rental income, which contributed 5% to total income in the first 6 months of 2004, is expected to increase in the future. GOLD's development policy for high-rise projects is flexible, depending on its requirement for trading income or recurring income. GOLD sold two serviced apartments in 2003, the Kallista Residences and Somerset. The Sky Villas, a 128-unit lease-hold condominium, was placed on the market in the beginning of 2004, and 80% of the units have been sold. GOLD plans to launch a new high-end condominium located at the corner of the Sathorn-Narathiwatrajanakarin intersection by the end of 2004.
TRIS Rating said that GOLD's debt significantly increased to Bt6,807 million at the end of June 2004 from Bt3,097 million at the end of 2002, due mainly to the acquisition of huge amounts of land during 2003. At the end of June 2004, its total debt to capitalization ratio increased to 55.6% from 54.4% and 41.0% at the end of 2003 and 2002, respectively. GOLD's cash flow protection deteriorated over the past years, mainly due to higher levels of debt. Its EBITDA interest coverage ratio decreased from 4.3 times in 2003 to 1.5 times in the first six months of 2004, while non-annualized funds from operations to total debt ratios significantly declined from 8.9% in 2003 to -0.4% in the first six months of 2004. For the coming years, GOLD's liquidity is expected to be tight and its debentures (GOLD05OA), which will expire in 2005, may need to be refinanced.
TRIS Rating also said that the real estate industry is highly cyclical, exhibiting much greater volatility than the general economy. Demand for housing is expected to grow for the next few years due to the favorable national economy. Increasing interest rates, oil prices, and construction costs could adversely affect real estate demand and operators' margins. -- End
Golden Land Property Development PLC (GOLD)
Issue Ratings:
GOLD05OA: Bt1,100 million senior secured debentures due 2005 Affirmed at BBB
GOLD088A: Bt1,100 million senior secured debentures due 2008 Affirmed at BBB
Rating Outlook: Stable