Tris assigns LH top marks
Tris Rating gave an A+ rating to Land & Houses Plc (LH), one of Thailand’s most prolific real estate companies, as well as the company’s proposed senior unsecured debentures.
The A+ rating, the highest credit rating available, reflects the company’s strong branding, leading position in residential property development, its consistent stream of income from rental assets, and moderate level of financial leverage.
The rating also took into account the competitive nature of the residential property development business as well as concerns around the high levels of household debt in Thailand that could possibly affect the affordability of properties for mid- to low-income homebuyers.
The high rating was because of LH’s position as one of the top three listed property developers in Thailand in terms of revenue and profitability. In 2017 the real estate company’s operating revenue reached a record high of over 35 billion baht and is expected to tally 36 billion in 2018.
However, Tris predicts revenue to drop to 32 billion baht in 2019 as fewer condos are transferred to buyers that year. The agency predicts profitability in the real estate market could come under threat because of rising land prices and increased competition.
LH succeeded because of a diversified product portfolio with strong branding, said Tris. The company offers a wide array of unit types such as condos, townhouses and single detached houses (SDH) at varied price ranges.
SDH comprised 75-80% of total presales from 2015 through the first half of 2018. LH also benefited from steady income streams from four hotels and four apartments in the US.
Tris predicts LH’s financial leverage to increase beyond its current level. LH’s budget for land acquisition will increase to 7 billion baht next year and it plans to launch 18 new projects worth 36 billion this year.
The agency also considers LH to have strong financial flexibility because of its investments in the Stock Exchange of Thailand comprising listed real estate and construction companies valued at over 68 billion baht as of June 2018.
The volatility of the housing market is greater than that of the overall economy, Tris warns. LH must tread carefully with its new projects to avoid a lack of demand in specific housing types and values.