TRIS Rating Affirms Company Rating of “NOBLE” at “BBB+” with “Stable” Outlook

TRIS Rating Co., Ltd. has affirmed the company rating of Noble Development PLC (NOBLE) at “BBB+” with “stable” outlook. The rating reflects NOBLE’s well-recognized brand in the middle- to high-end segments of the residential property market, product differentiation strategy, huge condominium backlog, and conservative pace of expansion. However, the company’s financial profile (on a cash-adjusted basis) from 2007 through the first nine months of 2009 was weaker than its previous track record. The weaker performance was the result of delays in transferring condominium units to customers because the company was awaiting final construction approval for the Environmental Impact Assessment (EIA). The transfers will occur during late 2009 and carry through the next three years. The rating also takes into consideration the cyclical nature of the industry.

The “stable” outlook reflects the expectation that NOBLE will be able to improve its financial performance in the medium term. Profitability and cash flow protection are expected to be higher when more condominiums are completed and delivered to the customers in the next three years. Financial leverage is also expected to remain at an acceptable level. However, if the company’s financial profile (on a cash-adjusted basis) does not improve, its rating might be affected.

TRIS Rating reported that NOBLE is a medium-sized property developer in Thailand. The company was established in 1991 and listed on the Stock Exchange of Thailand (SET) in 1996. The Thanakitamnuay family and related families continue to be the company’s major shareholders with a combined 14% stake. Since 2006, the company has launched more condominium projects rather than housing projects as the market trend has changed to favor urban living. Since 2007, condominiums have been a major source of NOBLE’s revenue, contributing 43%-79% of total revenue. Revenue from single detached houses (SDHs) continued to decrease, falling from 36% of total revenue in 2007 to 9% in the first nine months of 2009. Revenue from sales of townhouses and land plots during the first three quarters of 2009 constituted 31% and 15% of total revenue, respectively. NOBLE’s competitive advantage is derived from its well-recognized brand name and reputation as a property developer which provides unique product designs.

TRIS Rating said that NOBLE’s total revenue slightly increased from Bt2,293 million in 2007 to Bt2,352 million in 2008, as more condominium revenue was recognized. Revenue during the first nine months of 2009 grew by 19% to Bt2,022 million from the same period of 2008. Although revenue from both condominiums and SDHs decreased by 38% in the first three quarters of 2009, revenue from townhouses and land plots totaled Bt936 million helped drive the revenue growth. However, as a result of delays in transferring presale units, profitability and cash flow protection during the first nine months of 2009 remained lower than most leading property developers. The adjusted operating margin was 17.7% in the first three quarters of 2009. The funds from operations (FFO) to total debt was 3.72% during the first nine months of 2009. However, NOBLE’s liquidity is adequate, supported by a cash balance of Bt777 million and unused committed credit facilities of approximately Bt1,900 million as of September 2009. The total debt to capitalization ratio continued to increase, rising to 48.98% at the end of September 2009 from 36% at the end of 2006. The rise came because more condominium projects were under development. Nonetheless, the financial profile will improve when the company is able to transfer condominium units as scheduled.

The residential property market was volatile over the past year, reflecting the national political instability and global financial crisis. A gradual economic recovery and government tax incentives, which allow a personal income tax deduction of up to Bt300,000 for purchase of a new residence, are expected to support the residential property market in Greater Bangkok, said TRIS Rating. -- End

Company Rating: BBB+ Rating Outlook: Stable Copyright 2009, 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.