Fitch Ratings (Thailand) Limited has affirmed Siam Future Development Public Company Limited’s (SF) National Long-Term Rating at ‘BBB(tha)’ with Stable Outlook, its National Short-Term rating at ‘F3(tha)’ and its outstanding senior unsecured debentures at ‘BBB(tha)’.
Simultaneously, Fitch has assigned SF’s new issue of up to THB700m senior unsecured debentures due in 2017 a National Long-Term Rating of ‘BBB(tha)’. The proceeds will be used to refinance maturing debentures. The notes are rated at the same level as SF’s National Long-Term rating as they represent direct, unconditional, unsecured and unsubordinated obligations of the company.
Key Rating Drivers
Improving financial leverage: A planned capital increase of THB600m-THB1bn in 2013 is likely to decrease SF’s reliance on debt funding for its planned investment over the next two years. Fitch expects SF’s net adjusted debt to EBITDAR to improve to 5.3x-5.9x during 2013-2014 from 6.3x at end-2012. SF’s planned capex and new investment over 2013-2014 is about THB1bn-THB1.3bn.
Stagnant recurring income growth: Fitch expects SF’s recurring income growth to be stagnant over the next two years as a result of delays in the launch of new projects to late 2014.
Strong market position: SF is a leading developer of Thai medium-sized open-air shopping centres. Its larger portfolio, as well as its greater experience and expertise in this niche give it an advantage over its peers. SF has a quality shopping-centre portfolio, with an average occupancy of more than 90% since the opening of its first centre in 1995. Its average occupancy in shopping centres should remain above 90% in 2013-2015, despite tenant problems and low traffic in some major centres.
Secured cash flow: SF has long-term leases on about 65% of its total gross leasable area (GLA), which contributes around 35% of total recurring income. Its anchor tenants are also high profile and diversified. Its five largest tenants account for 40% of total GLA, while the largest tenant ? occupying 17% of total GLA ? is a related company. A new anchor in the form of high-profile furniture retailer IKEA ? a new franchise in Thailand ? will help enhance SF’s tenant profile.
Reliance on refinancing: SF’s THB748m debt, mainly THB700m debentures, will mature over the next 12 months. The company plans to refinance the maturing debt with new debentures. SF’s liquidity is supported by a cash balance and liquid investments of THB164m, and undrawn committed bank facilities of THB837m at end-March 2013. SF can also sell its existing projects to property funds or other operators, if needed.
Rating Sensitivities
Positive: Future developments that may, individually or collectively, lead to positive rating
action include:
-Improvement in recurring income with rental-derived EBITDA to interest expense at above 4.5x (FY to March 2013: 3.81x) on a sustained basis
-Financial leverage as measured by adjusted net debt to EBITDAR at below 4.5x on a sustained basis
Negative: Future developments that may, individually or collectively, lead to negative rating
action include:
- Deterioration in recurring income with rental-derived EBITDA to interest expense at below 3.0x on a sustained basis
-Financial leverage at above 6.5x on a sustained basis
Contacts:
Primary Analyst
Somruedee Chaiworarat
Associate Director
+66 2108 0160
Fitch Ratings (Thailand) Limited
Level 17, Park Ventures, 57 Wireless Road, Lumpini, Patumwan,
Bangkok 10330
Secondary Analyst
Pimrumpai Panyarachun
Associate Director
+66 2108 0161
Committee Chairperson
Vicky Melbourne
Senior Director
+612 8256 0325-NT-