Bangkok--5 Jun--TRIS Rating
TRIS Rating Co., Ltd. has assigned the rating of “A-” to the proposed issue of up to Bt500 million in senior debentures of TICON Industrial Connection PLC (TICON). At the same time, TRIS Rating has affirmed the ratings of TICON’s existing debentures at “A-” and the company rating of TICON at “A”. The rating outlook remains “stable”. The ratings reflect TICON’s leading position in the ready-built factory (RBF) industry, its predictable rental income, and strong operating performance.
The ratings also take into consideration the improved investment climate in Thailand following the current government policies to stimulate domestic consumption and promote foreign direct investment. The “stable” outlook is based on the expectation that TICON will be able to maintain its leadership position in its niche market of rental factories. Its recurring income from RBFs is expected to generate greater cushion to the company during the development period of its
logistics park and centers.
TRIS Rating reported that TICON is the leading provider of RBFs in Thailand. At the end of March 2008, the company’s portfolio comprised 123 leased factories located in 11 industrial estates, and 11 leased warehouses located in the company’s logistics park and logistics center. The leased properties cover an aggregate area of 384,080 square meters (sq.m.). As of April 2008, TICON’s major shareholders were Rojana Industrial Park PLC (Rojana) (21.9%); TICON’s management (9.4%); City Realty Group (5.9%); and Thailand Equity Fund (6.1%). The company’s competitive advantage stems from its long track record of providing RBFs, its ability to provide standard factories at competitive prices, its cost competitiveness from economies of scale, and a strategy of managing its own factory construction.
According to CB Richard Ellis (CBRE), based on leased space, TRIS Rating said that TICON and TICON Property Fund (TFUND) had a combined market share of 70% as of March 2008. This share is far higher than peer companies such as Hemaraj Land and Development PLC (Hemaraj) (11%), Pinthong Industrial Park Co., Ltd. (Pinthong) (9%), Thai Factory Development PLC (TFD) and its property fund (7%), and Amata Corporation PLC (Amata) (3%). TICON’s performance has been strong. Rental income from leased factories and warehouses has continuously grown, increasing to Bt178 million during the first three months of 2008 from Bt167 million in the same period of 2007. TICON has consistently generated substantial revenue from selling its factory to the TFUND; Bt2,058 million in 2007. Its debt to capitalization ratio simultaneously improved to 44%-47% during 2006 to the first quarter of 2008 from more than 50% during 2003-2005, despite growing development cost for warehouse for rent.
In 2008, Thailand’s economy is expected to improve due in part to the newly elected government, its new fiscal stimulus packages and policies to promote investment. However, short-term political uncertainty of the current government remains a rating concern, said TRIS Rating.