TRIS Rating Assigns “BBB/Stable” Rating to Senior Debt Worth Up to Bt1,000 Million of “SIRI”

TRIS Rating Co., Ltd. has assigned a “BBB” rating to the proposed issue of up to Bt1,000 million in senior debentures of Sansiri PLC (SIRI). At the same time, TRIS Rating has affirmed the company rating of SIRI at “BBB+” and has affirmed SIRI’s existing issue ratings at “BBB”. The outlook remains “stable”. The ratings reflect the company’s leading position and proven record in the residential property development industry, well-recognized condominium and housing brands, diversified product portfolio, and strong backlog which partly secures the company’s future revenue stream. These strengths are partially offset by an increasing financial leverage and selling and administrative (SG&A) expenses. The ratings also take into consideration the cyclical nature of the property development industry and rising construction costs, resulting from increasing construction material prices and the minimum wage hike. The “stable” outlook reflects the expectation that SIRI will be able to deliver a large amount of its backlog on schedule. Although its profitability is under pressure due to rising construction costs, SIRI is expected to sustain its operating profit margin at a satisfactory level in the medium term. Despite an aggressive expansion plan, SIRI’s cash flow protection should not deteriorate further and financial leverage should not be higher than the current level. TRIS Rating reported that SIRI is one of the leading property developers in Thailand. As of August 2012, the company had 76 residential projects in its portfolio, worth a total of around Bt95,000 million. The portfolio consists of condominium (44% of the total portfolio value), single-detached house (SDH, 41%), and townhouse (15%) projects. The average unit price across the portfolio was Bt3.7 million. At the end of June 2012, the company’s total backlog was approximately Bt39,000 million, while the value of the unsold units in its existing residential projects was around Bt30,000 million. SIRI’s main competitive edges are derived from its well-accepted brand, strong marketing strategies, and the good quality of its products, especially in the condominium segment. TRIS Rating said, SIRI’s presales in 2011 diminished by 13% to Bt21,792 million, down from a record high of Bt24,995 million in 2010. The drop was due mainly to declining presales of condominiums. After opening a number of condominium projects in the second half of 2010, SIRI launched fewer condominium projects in 2011. Condominium presales plunged by 43% year-on-year (y-o-y) to Bt8,204 million in 2011. Presales of SDHs and townhouses in 2011 grew by 35% and 18% y-o-y, respectively. During the first eight months of 2012, SIRI’s presales reached Bt23,239 million, significantly increasing from Bt14,404 million during the same period of 2011. The growth was primarily driven by the successful launches of several new condominium projects in 2012. Condominium presales in the first eight months of 2012 was Bt13,271 million, nearly equal to the record high of Bt14,486 million in condominium presales for the whole year of 2010. The high presales volume drove SIRI’s backlog considerably. SIRI’s total revenue increased to Bt20,542 million in 2011, up 10% from Bt18,596 million in 2010. Total revenue during the first half of 2012 was Bt10,586 million, 34% higher than Bt7,887 million during the same period of 2011. SIRI’s revenue rose in all three product categories. The gross profit margin improved to 33%-34% of total revenue during 2010 through the first six months of 2012. However, the expiration of the government tax incentives and more marketing spending drove SG&A expenses higher. SG&A expenses increased to 20% of total revenue in 2011 and 23% in the first half of 2012, up from 16%-18% during 2008-2010. The ratio of operating income as a percentage of sales declined to 12% during the first six months of 2012 from 15%-16% during 2009-2011. SIRI’s operating profit margin remained lower than most leading property developers. SIRI’s cash flow protection was weaker than its peers, as the ratio of funds from operations (FFOs) to total debt was 12% during 2009-2011 and 3.23% (non-annualized) in the first half of 2012. An aggressive expansion plan pushed financial leverage relatively higher than most listed property developers. The debt to capitalization ratio jumped to 67.48% as of June 2012 from 63% at the end of December 2010 and 2011, said TRIS Rating. – End. Sansiri PLC (SIRI) Company Rating: Affirmed at BBB+ Issue Ratings: SIRI155A: Bt1,000 million senior debentures due 2015 Affirmed at BBB SIRI167A: Bt1,000 million senior debentures due 2016 Affirmed at BBB SIRI16OA: Bt1,000 million senior debentures due 2016 Affirmed at BBB Up to Bt1,000 million senior debentures due within 2015 BBB Rating Outlook: Stable -กผ-

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