The “stable” outlook reflects the expectation that HMPRO will maintain its leading position among modern home improvement retailers. The company is expected to maintain strong liquidity and an acceptable leverage level as it expands. While the economy remains weak, demand for renovation and repair of existing homes is expected to partly mitigate the lower demand for new homes.TRIS Rating reported that HMPRO is Thailand’s leading modern home improvement retailer, operating under the “HomePro” brand name. Since its establishment in 1995, the company has successfully pursued a growth strategy by opening two to three new stores every year. A shift in consumer preferences towards modern retail outlets has fuelled its expansion, as HMPRO’s stores have become more well-accepted than traditional stores. As of September 2009, HMPRO had 35 stores, with 17 located in Greater Bangkok and 18 upcountry. The company operated total sales area of 230,600 square meters (sq.m.) and retail space for rent of 79,308 sq.m. For 2008, total revenue was Bt18,540 million and net profit was Bt959 million. With the expansion, HMPRO has established a strong footprint in the modern home improvement market. HMPRO aims to open more stores in provincial areas to serve customers in new markets. In 2009, the company opened two upcountry stores and plans to open two to four stores next year.
For the first six months of 2009, HMPRO’s sales continued to rise, climbing to Bt9,682 million, an 11.7% increase from the same period in 2008. Same-store sales grew by 5.6% for the first six months of 2009, despite a sluggish economy. The growth in same-store sales came from operational improvements to minimize lost sales and marketing strategies focused on existing homeowners. The product mix has also been adjusted to match changing customer preferences and affordability as consumer spending remains weak. The company has also benefited from selling more house-brand products. The proportion of private label and imported products rose from 3.1% of total sales in 2005 to 13.1% for the first six months of 2009. This rise boosted the gross margin from 21.6% in 2005 to 24% for the first six months of 2009.
TRIS Rating said, HMPRO’s financial position remains healthy. The total debt to capitalization ratio improved from 47.49% in 2007 to 42.79% in 2008 and to 43% as of June 2009, partly due to lower capital expenditures. Liquidity continues to be strong due to efficient cash management. Funds from operations (FFO) increased from Bt1,459 million in 2007 to Bt1,777 million in 2008 and to Bt918 million for the first six months of 2009, due mainly to store expansion and a higher contribution from rental income. The ratio of FFO to total debt remained strong at 47.98% in 2008 and 25.41% (non-annualized) for the first six months of 2009.
Company Rating: Affirmed at A
Issue Ratings:
HMPRO115A: Bt500 million senior debentures due 2011 Affirmed at A
HMPRO11NA: Bt630 million senior debentures due 2011 Affirmed at A Rating Outlook: Stable