Tris Rating affirms the company rating on Land and Houses Plc (LH) and the ratings on LH's senior unsecured debentures at A+ with a stable outlook.
The ratings reflect the company's leading position among property developers in Thailand, strong brand position in diversified residential product types, reliable stream of income from rental assets, and moderate level of financial leverage.
The ratings take into consideration the financial flexibility derived from its portfolio of marketable securities, and concerns regarding the adverse effects of Covid-19, which have severely impacted its hospitality and retail businesses and also put more pressure on the domestic economy and demand for residential properties in the short to medium term.
The pandemic led Tris to forecast LH's revenue at 28 billion baht in 2020, improving to 32-34 billion baht per year during 2021-2022.
"We expect LH's profitability to soften from a lower revenue base and intense competition in the property market. However, we believe LH should be able to control selling and administrative costs and sustain an Ebitda margin at around 36%-39% during 2020-2022," said Tris Rating.
LH's presales during the first six months of 2020 stood at 13.4 billion baht. As of June 2020, LH had around 77 existing projects with total remaining project value of 57 billion baht (including built and unbuilt units).
Tris Rating expects LH's financial leverage to edge up slightly in the next three years from its usual huge dividend payouts, the expansion in its residential property development business, and capital spending in its rental property business.
Tris expects the company's debt-to-capitalisation ratio to range between 47%-49% during 2020-2022, up from 47% in the past three years.
The ratio of funds from operations to debt is expected to recover from 16% in 2020 to stay around 19%-24% in 2021-2022.
The stable outlook on LH's ratings reflects the expectation that the company will maintain its strong market position, achieve steady presales and decent operating performance, and maintain acceptable financial leverage.