Tris Rating has affirmed the company rating of AP Thailand Plc and its outstanding senior unsecured debentures at A-.
Tris assigns a rating of A- to AP's proposed issue of up to 2 billion baht in senior unsecured debentures due within four years. The company plans to use the proceeds from the new debentures to repay some of its existing loans and fund business expansion.
The ratings reflect AP's satisfactory business profile, driven by its proven track record in the residential property development industry, diverse range of products and moderate backlog that secures a portion of its future revenues.
These strengths are partially offset by the cyclical nature of the property development industry, AP's moderate use of financial leverage, and concerns over the relatively high level of household debt nationwide.
AP's operating performance in the first quarter of 2018 was slightly higher than Tris's expectation. As of June 2018, AP-owned projects generated presales of 13.2 billion baht, up 55.4% from the same period last year. The company also had 4.05 billion baht in presales from condominium projects undertaken by joint venture.
AP revenue in the first quarter of 2018 was 5.6 billion baht, up 33.6% year-on-year. Revenue from the housing segment increased 58% year-on-year. Operating margin (operating income before depreciation and amortisation as a percentage of revenue) was 17.3% in the first quarter of 2018, increasing from 14.5%-16.5% during 2015-17.
At the end of March 2018, the value of the backlog stood at 7.5 billion baht, split between housing units worth 4.28 billion baht and condominium units worth 3.22 billion. The backlog is expected to be recognised as revenue in 2018 and 2019. The backlog of projects under joint ventures was 37.3 billion baht, expected to be transferred from 2018 onwards.
Tris Rating expects AP to realise a share of profits from investments in its joint ventures of between 600 million and 1 billion baht a year during 2018-20.
The total debt-to-capitalisation ratio (including 51% of the debt carried by joint ventures) at the end of March 2018 was 53.3%, up from 51.8% at the end of 2017. This ratio rose because several large condominium projects were launched and AP bought more land for new projects. That ratio is projected to stay at 50%-55% over the next three years.