Bangkok--19 Jul--Fitch Ratings
Fitch Ratings (Thailand) Limited today has assigned a National Long-term rating of 'BBB+(tha)' to Thailand-based Siam Future Development Public Company Limited's (SF) new three-year senior unsecured debentures of up to THB1.0 billion, due 2010. The proceeds from the new debentures will be used to refinance SF's short-term debt and fund its working capital requirements.
The rating reflects SF's established local market position in the medium-scale open-air shopping centre business and its high-quality portfolio of shopping malls, evidenced by its consistently high occupancy rate of more than 90% since inception, despite the weaker economic conditions in Thailand and growth in retail space. The rating also reflects the continued growth in its recurring rental and service income. This is backed by the increasing number of newly launched projects in the portfolio, the diversified tenant profiles, and the secured cash flow streams provided by long-term lease contracts, which accounted for 54% of its gross leasable area (GLA) in 2006.
SF plans to expand its GLA by at least 25% per annum over the next two-to-three years, with a budgeted capital expenditure of around THB1.8 billion per annum. The company has plans in 2007 to launch a new lifestyle centre, The Avenue Pattaya, and a community centre at Pak Chong. By the first half of 2008, SF targets to open two additional lifestyle centres - the Major Avenue Ratchayothin, and the Sena Avenue at Kaset-Nawamin - as well as a neighbourhood shopping centre at Nawamin (Sukhapiban 1).
In the first quarter of 2007 (Q107), the company reported a year-on-year growth in sales and EBITDAR of 88% and 27%, respectively, mainly due to an accounting effect from the recognition of income from finance leases. SF's net adjusted debt/last-twelve-months (LTM) EBITDAR substantially improved to 3.6x at end-Q107 from 6.9x at end-2005, despite the increasing net debt to fund its rapid expansion. Its LTM funds from operations (FFO) adjusted net leverage ratio and its net debt/LTM cash flow from operations (CFO) also declined to 3.6x and 3.3x at end-Q107 from 8.0x and 12.2x at end-2005, respectively.
Nevertheless, SF's key credit concerns include the continuation of its aggressive expansion plans over the next few years. While the project expansion should help strengthen SF's cash flow generating capabilities, Fitch notes that a major delay in the new project launches could negatively impact the company's liquidity and financial leverage. However, this is partially mitigated by the availability of its undrawn committed credit facilities of THB681 million at end-Q207. Despite its large capital spending and increasing debt level, SF should be able to maintain its net adjusted debt/EBITDAR ratio in the range of 2.5x-3.0x during 2007-2008. This is primarily due to the projected growth in EBITDAR and the expected receipt of tenant upfront payments to finance the new projects.
Shivani Sundralingam, Singapore, Tel: + 65 6336 0095.