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Central Pattana Plc Thai Airways International CENTRAL PATTANA PLC No. 75/2015 9 December 2015 Company Rating: THAI AIRWAYS AA- Rating Rationale INTERNATIONAL PLC TRIS Rating affirms the company rating and the existing senior unsecured Issue Ratings: debenture ratings of Central Pattana PLC (CPN) at “AA-”. At the same time, SeniorAnnouncement unsecured no. 111 AA - 12 November 2011 TRIS Rating assigns the rating of “AA-” to CPN’s proposed issue of up to Bt2,200 Outlook: Stable million in senior unsecured debentures. The proceeds from the new debentures will be used for business expansion. The “AA-” ratings reflect the company’s Company Rating History: leading position in the retail property development industry in Thailand, proven Date Rating Outlook/Alert record of managing high-quality shopping centers, reliable cash flows from 12/05/14 AA- Stable contract-based rental and service income, and conservative financial policy. The 05/02/13 A+ Positive 23/05/07 A+ Stable ratings also take into consideration the large amount of capital expenditures 22/02/05 A Stable needed for business expansion during 2015-2018. 12/07/04 A- Positive CPN is the largest retail property developer in Thailand. Its major 04/10/02 A- shareholders are the Chirathivat family (29%) and Central Holding Co., Ltd. (26%). 17/05/01 BBB+ The ownership link with the Central Group is a benefit for CPN since many anchor stores under the group have been strong magnets for shopping centers owned by CPN. As of September 2015, CPN managed 28 shopping centers, with a total retail space of 1.54 million square meters (sq.m.). CPN recently opened Central Festival East Ville with retail space of 34,500 sq.m. in November 2015. The centers are located in Bangkok and major cities in Thailand. CPN has long been the market leader in the Thai retail property industry. As measured by total retail space in Greater Bangkok, CPN had approximately 20% market share during the past four years. CPN’s solid operating performance is attributable to the high occupancy rates (OR) and healthy growth in same-store sales for its shopping centers. The OR of CPN’s shopping centers have been above 92% since 2007. At the end of September 2015, its three new shopping centers, namely Central Plaza Rayong, Central Festival Phuket 1, and Central Plaza Westgate, had ORs of 90%, 95%, and 89%, respectively. CPN’s rental and service income soared to Bt20,375 million in 2014, a 12% year-on-year (y-o-y) rise. During the first nine months of 2015, rental and service income increased by 7% y-o-y to Bt16,199 million. The growth was due to Contacts: the openings of several new shopping centers and a 2% y-o-y rise in same-store Jutamas Bunyawanichkul rental and service income during the first nine months of 2015. In the next three [email protected] years, CPN’s rental and service income is expected to increase to Bt28,000 million with 35 shopping centers by 2017. Pramuansap Phonprasert [email protected] The company’s operating margin, defined as operating income before depreciation and amortization as a percentage of total revenue, was 54% in 2014 Wiyada Pratoomsuwan, CFA and 57% during the first nine months of 2015, up from 51% in 2013 and 49% in [email protected] 2012. CPN’s ability to increase its rental rates, control operating costs, and control WWW.TRISRATING.COM selling and administrative (SG&A) expenses drove profitability higher. CreditUpdate reviews ratings of companies or debt issues that have already been rated by TRIS Rating. The CreditUpdate occurs when new debt instruments are issued or if significant events have taken place that may impact a company's current ratings or when current ratings are cancelled. The CreditUpdate announces whether a rating has been "upgraded," "downgraded," "affirmed" or "cancelled." The update includes information to supplement the previously published ratings. CreditUpdates are part of TRIS Rating's monitoring process. TRIS Rating monitors every rating it assigns until either the debt instrument matures or the rating contract ends. To keep the public informed of changing situations, TRIS Rating periodically issues announcements about the credit ratings it monitors. The company’s debt to capitalization ratio was 45% as of September 2015, increasing from 41% as of December 2014. CPN’s liquidity remained strong as the ratio of funds from operations (FFO) to total debt was 36% in 2014 and 31% in the first nine months of 2015 (annualized with trailing 12 months), up from 28% in 2013 and 24% in 2012. CPN’s financial flexibility was supported by cash on hand of Bt2,500 million and unused credit facilities of Bt8,600 million as of September 2015. Despite the large capital expenditures of Bt23,000 million planned for 2015 and around Bt15,000 million per annum during 2016-2018, TRIS Rating expects that CPN should keep the debt to capitalization ratio at less than 55% over the next three years. FFO is projected to be approximately Bt10,000 million per annum. Rating Outlook The “stable” outlook reflects the expectation that CPN will sustain the strong operating performance of its shopping centers. Despite pursuing its growth strategy, the company is expected to maintain its financial discipline. The net interest- bearing debt to equity ratio should be kept lower than 1 times. CPN’s ratings and/or outlook could be revised downward should its operating performance and financial profile significantly deteriorate from the current levels. On the contrary, the ratings and/or outlook would be upgraded if CPN’s expansion strengthens its business position and financial profile. Central Pattana PLC (CPN) Company Rating: AA- Issue Ratings: CPN164A: Bt1,000 million senior unsecured debentures due 2016 AA- CPN16OA: Bt1,200 million senior unsecured debentures due 2016 AA- CPN172A: Bt1,500 million senior unsecured debentures due 2017 AA- CPN174A: Bt500 million senior unsecured debentures due 2017 AA- CPN176A: Bt600 million senior unsecured debentures due 2017 AA- CPN188A: Bt1,400 million senior unsecured debentures due 2018 AA- CPN18OA: Bt500 million senior unsecured debentures due 2018 AA- CPN208A: Bt1,400 million senior unsecured debentures due 2020 AA- CPN21OA: Bt300 million senior unsecured debentures due 2021 AA- CPN221A: Bt1,000 million senior unsecured debentures due 2022 AA- CPN228A: Bt800 million senior unsecured debentures due 2022 AA- Up to Bt2,200 million senior unsecured debentures due within 2022 AA- Rating Outlook: Stable Page 2 Central Pattana PLC 9 December 2015 Financial Statistics and Key Financial Ratios* Unit: Bt million --------------------------- Year Ended 31 December ---------------------- Jan-Sep 2014 2013 2012 2011 2010 2015 Rental and service income 16,199 20,375 18,128 15,325 10,853 9,822 Food and beverage sales 762 975 882 725 632 550 Gross interest expense 340 677 813 1,057 874 688 Net income from operations 5,970 7,307 6,293 6,189 2,058 1,900 Funds from operations (FFO) 8,716 10,515 9,139 9,001 4,229 3,694 Capital expenditures 14,611 11,679 11,807 9,257 13,794 6,179 Cash and short-term investment 2,522 3,773 1,869 4,207 945 1,632 Total assets 99,964 89,035 77,539 69,636 64,059 53,869 Total debt 22,952 16,023 19,846 25,788 25,894 19,941 Shareholders’ equity 44,902 41,748 36,824 25,900 20,448 18,918 Operating income before depreciation and 57.15 53.82 51.29 48.89 42.24 40.50 amortization as % of rental & service income and sales Pretax return on permanent capital (%) 12.12 ** 14.91 13.66 13.90 6.93 7.87 Earnings before interest, tax, depreciation, and 8.47 8.35 8.69 7.96 4.97 5.28 amortization (EBITDA) interest coverage (times) FFO/total debt (%) 31.01 ** 36.13 28.20 11.66 12.45 24.44 Total debt/capitalization (%) 44.84 41.08 46.82 58.71 63.95 61.07 Total debt/capitalization (%) *** 33.83 27.74 35.02 49.89 55.88 51.32 Note: All ratios are operating lease adjusted * Consolidated financial statements ** Annualized with trailing 12 months *** Excluding capitalized annual leases TRIS Rating Co., Ltd. Tel: 0-2231-3011 ext 500 / Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand www.trisrating.com © Copyright 2015, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution, or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited, without the prior written permission of TRIS Rating Co., Ltd. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness.
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