ANAN is engaged in development and sale of residential real estates, mainly condominium projects with close proximity to mass transit electric-train stations in Bangkok. The company was established in 1999 by the Ruangkritya family. In 2003, Mr. Chanond Ruangkritya became the company’s largest shareholder. During 2006-2007, ANAN and Pramerica Real Estate Investors (Pramerica), an overseas property fund manager, jointly established Ananda Development One Co., Ltd. (ADO) and Ananda Development Two Co., Ltd. (AD2) to develop low-rise and condominium projects, respectively. Pramerica invested 95% of total funding in both ventures. ANAN invested 5% and acted as a property developer and manager. ANAN fully acquired AD2 from Pramerica in 2010 and ADO in 2012. ANAN was listed on the Stock Exchange of Thailand (SET) in December 2012. As of April 2013, Mr. Chanond Ruangkritya was ANAN’s largest shareholder, holding 53.1% of total shares. The company’s revenue in 2012 stood at Bt5.1 billion.
ANAN’s business risk is moderate. The business profile takes into consideration operating track records and financial performance of ADO and AD2 as if both entities had been wholly owned by ANAN since their inceptions. This is because ANAN had been highly involved in all key aspects of the project developments for ADO and AD2. ANAN has a strong competitive position in condominium projects located within 300 metres from electric-train stations. This is underscored by respectable presale and transfer records in condominium projects under “Ideo” brand. The company launched its first condominium project under AD2 in 2007. At the end of March 2013, all 12 condominium projects under AD2, with a total project value of Bt20 billion, were 96% sold and 90% transferred in terms of value. ANAN’s four condominium projects, launched in February 2012 with a total project value of Bt9.6 billion, were 77% sold. In the first quarter of 2013, ANAN launched a condominium project under “Elio” brand, priced at around Bt1.5 million per unit, and generated presales of Bt874 million by the end of March 2013.
ANAN’s credit profile is; however, weighed by limited and discontinued operational track records, particularly in low-rise products. The ratings also reflect risks from high product concentration in condominium segment. In TRIS Rating’s view, it should require some times for ANAN to prove its strategic execution capabilities in responding to the continuing changes in real estate market dynamics and competitive landscape, as well as rising challenges in acquiring land plots nearby mass transit stations.
ANAN’s financial profile reflects variability in cash flow generations over the medium term due to a discontinuation in projects launched in the past, as well as an expected rise in financial leverage from a sharp rise in new projects launched to sustain business growth momentum. In 2013, ANAN plans to launch new condominium projects worth Bt25.7 billion and re-launch low-rise projects worth Bt7.3 billion previously under ADO. For the next three years, ANAN expects to generate revenues in a range of Bt12-Bt15 billion per annum. About 80%-90% of revenue will come from high-rise projects. At the end of March 2013, ANAN’s condominium backlog was Bt9.9 billion. Most of the backlog is expected to be transferred in 2013.
ANAN’s operating margins (operating income before depreciation and amortization as a percentage of revenue) during 2010-2012 were unusually low and volatile. This was due to the consolidation of AD2’s projects in 2010 at fair value, which was around Bt1.5 billion higher than the book value. The impacts from acquiring AD2 at high fair value had pressured net profits during 2010-2012, but will not be material from 2013 onward. On the other hand, ANAN should benefit from the purchase of ADO’s assets at price below book value. This should allow ANAN to offer competitive pricing for the low-rise projects under ADO. In the medium term, TRIS Rating expects ANAN’s operating margin to stay above 17% on average, considering pressures from higher operating expenses to support a sharp increase in new projects launched.
The debt to capitalization ratio of ANAN at the end of March 2013 stood at 35.6%. The leverage ratio is considered unusually low, given that ANAN just raised Bt5.4 billion from the initial public offering. TRIS Rating expects ANAN’s leverage to rise in the medium term from business expansion, but the debt to capitalization ratio is not expected to exceed 66%. ANAN’s liquidity profile is acceptable. At the end of March 2013, ANAN’s debts maturing within the next 12 months were Bt1.7 billion. The ratings also consider ANAN’s future obligations to pay ADO’s shareholders for a total of Bt750 million by installments until mid-2014. ANAN’s liquidity sources include Bt1.9 billion in cash and Bt6.3 billion in undrawn long-term facilities at the end of March 2013, as well as expected funds from operations (FFO) of Bt1-Bt1.5 billion on average per annum.
Ananda Development PLC (ANAN)
Company Rating: BBB-
Issue Rating: Up to Bt2,500 million senior debentures due within 2016 BBB-
Rating Outlook: Stable