TRIS Rating Upgrades Company Rating of “SIRI” to “BBB+” from “BBB” And Issue Rating to “BBB” from “BBB-”with “Stable” Outlook

TRIS Rating Co., Ltd. has upgraded the company rating of Sansiri PLC (SIRI) to “BBB+” from “BBB” and has also upgraded the rating of SIRI’s existing debentures to “BBB” from “BBB-”. The rating outlook is “stable”. The upgrades reflect SIRI’s improving financial profile. The ratings are based on SIRI’s leading position and strong presence in the condominium segment, and well-accepted brand names in the residential property market. The strengths are partially offset by the uncertain economy which may cause a downturn in the property industry, the cyclical nature of the industry, and commercial banks’ tight credit policies, which limit access to mortgage financing for homebuyers. TRIS Rating also takes into consideration the cyclical nature of the property development market and the relatively low level of consumer confidence, which is the result of economic conditions and the uncertain political situation.


The “stable” outlook reflects the expectation that SIRI will be able to manage construction of several condominium projects as planned. During the slowing economy, revenue will be partly secured by its large condominium backlog. Transfer risk of its condominiums is somewhat reduced by the recent government stimulus tax package and its cash-advance collection scheme, which voluntarily offers an upfront payment of the condominium price with attractive discounts. Profitability is expected to stay at the 2009 level, though the government tax incentives on special business tax and transfer fee will expire in March 2010. In the short term, leverage is expected to drop below 50% when some condominium projects are finished and transferred to customers during the period of tax incentives.

TRIS Rating reported that SIRI is one of the leading property developers in Thailand. As of November 2009, the company had more than 50 residential property projects in the portfolio, worth a total of around Bt70,000 million. The portfolio consists of condominium (50% of the total portfolio value), single-detached house (SDH) (35%) and townhouse (15%) projects. The average unit price across the portfolio fell to Bt4.3 million, reflecting a policy to expand its customer base to add the medium-priced segment in its portfolio. As of November 2009, the company’s total backlog was nearly Bt16,600 million, while the unsold value of the existing residential projects was around Bt17,000 million. SIRI’s main competitive edge stems from its well-accepted brand, strong marketing strategies and the good quality of its products, especially in the condominium segment.

TRIS Rating said, although overall economy slowed in 2009, SIRI reported increasing revenue due to its high backlog and greater market share gained from small developers. Revenue rose to Bt11,006 million in the first three quarters of 2009, from Bt10,067 million in the same period of 2008. SIRI slowed its pace of investment from late 2008 through early 2009 in response to economic uncertainty. The pace returned to normal after mid-2009 onwards. Land acquisition decreased to around Bt2,500 million for the fiscal year 2009, from around Bt4,000-Bt4,500 million in 2007 and 2008. However, the value of project openings increased to around Bt19,000 million in 2009 from around Bt12,000 million in 2008. As a result of more project openings, presales increased to Bt13,585 million in the first 11 months of 2009, from Bt10,258 million in the same period of 2008. New condominium projects worth more than Bt7,000 million were launched, while condominium presales were Bt6,300 million for the first 11 months of 2009. In 2009 the company enjoyed the full year benefit from the government’s tax incentives, introduced in late March 2008. Hence, operating margins in the first three quarters of 2009 strengthened further to 14.4% from 12.2% in 2008 and 10.2% in 2007. Earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage has stayed at 2.8-3.3 times over the last three years. Funds from operations (FFO) to total debt dropped from 10% (non-annualized) in the first three quarters of 2008 to 8.4% in the same period of 2009, but is expected to improve from more condominium transfers in the fourth quarter of 2009. The debt to capitalization ratio increased from 47.5% in December 2007 to 53.4% in September 2009 due to additional capital outlays for condominium construction, and is expected to decrease in late 2009.

The residential property market was volatile over the past year, reflecting the national political instability and global financial crisis. Although it recovered in the second half of 2009, the market remained relatively slow and has become increasingly dominated by major developers. Government tax incentives that allowed homebuyers to get a personal income tax deduction of up to Bt300,000 for the purchase of a new residence expired in December 2009. Demand for residential property in 2010 will depend heavily on the pace of recovery in economy and consumer confidence. TRIS Rating said it expects the demand to be in line with that in 2009.