The “stable” outlook reflects the expectation that PF will be able to sustain its operating performance during more intense competition. With higher land acquisition costs and intensive capital requirements to support an aggressive expansion plan, financial leverage will be higher than during the past several years. However, TRIS Rating expects that management will carefully pursue growth and maintain a level of leverage that will not hurt its financial position.
TRIS Rating reported that PF is one of the leading residential property developers in Thailand. The company was established in 1985 by Mr. Chainid Ngowsirimanee and was listed on the Stock Exchange of Thailand (SET) in 1993. After concluding a debt-equity swap as part of debt restructuring program, the creditors became the major shareholders. As of May 2010, the three largest creditors, Japan Asia Group Ltd., MJL Intertrade Co., Ltd., and Natee International Law Office Co., Ltd., together held 22.87% of the total outstanding shares. PF offers a wide range of products including single detached houses (SDH), duplex houses, townhouses, and condominiums. Its products target the middle- to high-end segments with selling prices per unit between Bt2.5-Bt20.0 million for SDHs, Bt1.7-Bt4.5 million for townhouses, and Bt1.2-Bt3.0 million for condominiums. The revenue from selling land plots, which accounted for 33% of total revenue during the first three months of 2010, pushed the revenue contribution from SDHs to decline to 48% from an average of 66% during 2007-2009. However, SDHs remained the largest source of revenue. Revenue from townhouses represented 19% of total revenue during 2009 through the first quarter of 2010. Condominiums constituted only 1% of total revenue in the first three months of 2010. PF’s competitiveness is derived from its well-accepted brand name and large land holdings along future mass transit lines. The company differentiates its residential projects by providing grand central facilities to homeowners. This feature has become one of the company’s key selling points.
PF’s presales in 2009 rose to Bt6,682 million, up 5% from Bt6,354 million in 2008. During the first half of 2010, presales was Bt3,985 million, increasing from Bt3,146 million in the same period of 2009. The growth in presales was mainly driven by rising townhouse presales. PF’s revenue in 2009 was Bt5,852 million, a 22% drop from Bt7,538 million in 2008. The decline was caused by the drop in revenues from SDHs and condominiums in 2009. In addition, there was a delay in the sale of a land plot to the University of the Thai Chamber of Commerce (UTCC). However, the revenue in the first quarter of 2010 improved to Bt2,409 million, up significantly from Bt1,452 million in the same period of the prior year. The increase was the result of improving housing sales and the revenue of Bt785 million from the sale of a land plot to the UTCC. The company’s profitability was strengthened as the adjusted operating profit margin increased to 15.04% in the first three months of 2010 from 12.39% in 2009 and 13.98% in 2008. Cash flow protection also moved in the same direction in the first quarter of 2010 with the ratio of funds from operations (FFO) to total debt at 3.51% (non-annualized), compared with 8.85% in 2009. Despite improving, the company’s profitability and liquidity remained relatively weaker than most of the leading property developers. Financial leverage continuously increased, rising to 50.28% as of March 2010, up from 47.32% and 43.36% at the end of 2009 and 2008, respectively.
The residential property market was volatile in 2009, reflecting the political instability and the global financial crisis. Although it recovered in the second half of 2009, the market remained relatively slow and has been increasingly dominated by major developers. After delivering favorable performance in 2009, almost all large developers have set quite aggressive expansion plans for the next two to three years. The acquisition of land at appropriate locations will likely be more expensive. As most government tax incentives expired in 2010, demand for residential property in 2010 will depend heavily on consumer confidence and the pace of economic recovery. TRIS Rating expects to see demand for residential property in 2010 to recover alongside the growth in the domestic economy and consumer confidence.
Property Perfect PLC (PF)
Company Rating: Affirmed at BBB-
Issue Ratings:
PF112A: Bt300 million senior secured debentures due 2011 Affirmed at BBB
PF128A: Bt800 million senior secured debentures due 2012 Affirmed at BBB
PF132A: Bt1,500 million senior partially guaranteed debentures due 2013 Affirmed at BBB
Rating Outlook: Stable