Bangkok--Oct 18--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the ratings of senior secured debentures (GOLD05OA and GOLD088A) of Golden Land Property Development PLC (GOLD) at “BBB” with “stable” outlook. The ratings reflect GOLD’s strong brand name in the high-income housing market, its ability to acquire land in prime locations, the successful launch of its first two condominium projects, and recurring income from its serviced apartments. These strengths are partly offset by GOLD’s highly-leveraged balance sheet, concerns about construction management during a period of rising construction costs, and the cyclical nature of the property development market. Increasing industry risks, such as rising interest rates, higher construction material costs, and decreasing consumer confidence, are also 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” outlook reflects the expectation that GOLD will be able to maintain its position in the luxury residential market. Recurring income from serviced apartments is expected to increase since both of GOLD’s serviced apartments will be fully operational for the full year. The company is anticipated to maintain its debt to capitalization ratio at its current level in the medium term. Although TRIS Rating expects no immediate change in GOLD’s operation following the resignation of its CEO in October 2005, TRIS Rating will closely monitor GOLD’s direction and performance under new management team.
TRIS Rating reported that GOLD’s performance for the first half of 2005 was below expectations as revenue declined by Bt901 million from the same period last year, to Bt1,002 million. The company reported a net loss of Bt48 million for the first half of 2005, as there were construction delays in single detached house (SDH) projects that resulted in less revenue being recognized in this period. However, a successful launch of The Infinity condominium project has provided a lump sum cash inflow from down payments worth around Bt300 million during the first half of 2005. Recurring income from serviced apartment rentals increased by 50% as its newest serviced apartment, The Ascott Sathorn, was fully operational for the first half of 2005. Recurring income from serviced apartment rentals is less affected by housing industry cycles.
TRIS Rating said that competition in the housing market in 2005 is expected to intensify as there are more housing units on offer at a time when demand is expected to be softer than in 2004. Increasing construction material prices, together with rising interest rates, will put more pressure on developers’ margins. The tighter lending policies adopted by commercial banks will likely limit the expansion of the industry while rising interest rates will likely soften housing demand. End.