Tris Rating keeps Amata at A

Tris Rating has affirmed the rating of Amata Corporation Plc (AMATA) and its outstanding senior unsecured debentures at A, partially constrained by the volatility of the industrial property market and regulatory risk for its Vietnam investments.

The rating reflects the company’s proven record as one of the leading industrial estate developers in Thailand, as well as a sizeable base of recurring revenues from utility services and dividends from a number of investments in the power business.

In 1994, Amata expanded to Vietnam to develop the Amata City Bien Hoa Industrial Estate. Revenue from land sales in Vietnam ranged from 320-642 million baht in 2015-2017, accounting for 10-31% of Amata’s revenue from land sales each year.

The gross margin of land sales in Vietnam is satisfactory, ranging between 56%-75% in 2015-2017.

During the first quarter of 2018, revenue from land sales was 316 million baht, while the gross margin was 75.2%.

Reductions in investment spending and low capacity utilisation have curbed industrial land sales nationwide during the past few years.

Amata’s land sales reflected the slump in the industry. After peaking above 1,200 rai in 2013, sales dropped, sinking to about 600 rai in 2015 and 2016, 431 rai in 2017, and 28 rai in the first quarter of 2018.

Yet Amata is expected to be the beneficiary of positive news about the Eastern Economic Corridor bill on the back of plentiful land banks of about 10,000 rai for sale in Rayong and Chon Buri.

Recurring revenue from utility services, covering supply of raw water and processed water as well as wastewater treatment service, has increased steadily thanks to the rising number of customers and increasing demand from new power plants in Amata’s industrial estates.

Revenue from utility services escalated from 1.25 billion baht, accounting for 17% of total revenue in 2013, to 1.79 billion or 40% of the total in 2017.

Recurring revenue from utility services will increase gradually, as three new power plants located in Amata City Industrial Estates in Rayong province are scheduled to start commercial operations in 2018.

Under Tris Rating’s base-case scenario, Amata’s revenue will rise from 4.49 billion baht in 2017 to 6 billion in 2020.

Funds from operations are projected to hover around 2 billion baht per year during 2018-2020, while earnings before interest, taxes, depreciation and amortisation will range from 2.7-3 billion baht.

Amata has scheduled debt repayment of 800-1.8 billion baht per year.