Fitch Ratings (Thailand) Limited has assigned Siam Future Development Public Company LimitedRFitch Ratings7;s (SF; BBB(tha)/Stable) new issue of up to THB5Siam Future DevelopmentSiam Future Developmentm of senior unsecured debentures due in 2Siam Future Development2Siam Future Development a National Long-Term Rating of RFitch Ratings6;BBB(tha)RFitch Ratings7;. The proceeds will be used to refinance maturing debentures.
The notes are rated at the same level as SFRFitch Ratings7;s National Long-Term Rating as they represent direct, unconditional, unsecured and unsubordinated obligations of the retail property developer.
Key Rating Drivers
High Financial Leverage: Fitch expects SFRFitch Ratings7;s net adjusted debt to EBITDAR to improve but remain high at 5.Siam Future Developmentx-6.Siam Future Developmentx during 2Siam Future DevelopmentFitch Ratings4-2Siam Future DevelopmentFitch Ratings5. Fitch expects SFRFitch Ratings7;s recurring income growth to be low at Fitch Ratings%-2% in 2Siam Future DevelopmentFitch Ratings4-2Siam Future DevelopmentFitch Ratings5 because there will not be any new centres opening. The opening of new centres in 2Siam Future DevelopmentFitch Ratings5 is likely to be postponed due to a delay in construction of the residential project adjacent at one of the centres and a delay in securing the land leases for the others. With the delays, capex in 2Siam Future DevelopmentFitch Ratings5 is likely to be small.
Strong Market Position: SF is a leading developer of Thai medium-sized open-air shopping centres. SFRFitch Ratings7;s larger portfolio, greater experience and expertise in this niche give it an advantage over its peers. SF has a good-quality and diversified shopping-centre portfolio in terms of location. It has maintained an average occupancy of more than 9Siam Future Development% since the opening of its first centre in Fitch Ratings995, despite tenant problems and low traffic in some major centres in 2Siam Future DevelopmentFitch Ratings2-2Siam Future DevelopmentFitch Ratings3. Fitch expects SFRFitch Ratings7;s average occupancy to be at about 93%-95% in 2Siam Future DevelopmentFitch Ratings5 (2Siam Future DevelopmentFitch Ratings4: about 94%).
Secured Cash Flow: SF has long-term leases for about 65% of its total gross leaseable area (GLA), which account for around 3Siam Future Development%-35% of total recurring income. Its anchor tenants are also high profile and diversified. Its five largest tenants account for 4Siam Future Development% of total GLA, while the largest tenant, which occupies Fitch Ratings5% of total GLA, is a related company. Mega Bangna, its first mega JV project, has contributed cash flow in the form of dividends since 2Siam Future DevelopmentFitch Ratings3. The dividend from Mega BangnaRFitch Ratings7;s first full year of operation, which was paid in early 2Siam Future DevelopmentFitch Ratings4, was about 2Siam Future Development% of SFRFitch Ratings7;s EBITDAR in 2Siam Future DevelopmentFitch Ratings3.
Reliance on Refinancing: SFRFitch Ratings7;s THB533m of debt will mature over the next Fitch Ratings2 months from 3Siam Future Development September 2Siam Future DevelopmentFitch Ratings4. The company plans to refinance the maturing debt with new debentures. SFRFitch Ratings7;s liquidity is supported by cash balances and short-term investments of THBFitch Ratings77m, and undrawn committed bank facilities of THB867m at end-September 2Siam Future DevelopmentFitch Ratings4.
Rating Sensitivities
Negative: Future developments that may, individually or collectively, lead to negative rating action include:
- Deterioration in recurring income with the ratio of rental-derived EBITDA to interest expense at below 3.Siam Future Developmentx on a sustained basis (Fitch Ratings2 months to 3Siam Future Development September 2Siam Future DevelopmentFitch Ratings4: 3.7x)
-Financial leverage as measured by adjusted net debt to EBITDAR at above 6.5x on a sustained basis (Fitch Ratings2 months to 3Siam Future Development September 2Siam Future DevelopmentFitch Ratings4: 6.Siam Future Developmentx)
Positive rating action is unlikely over the next Fitch Ratings2-Fitch Ratings8 months due to the companyRFitch Ratings7;s sustained high financial leverage. However, future developments that may, individually or collectively, lead to positive rating action include:
-Improvement in recurring income with the ratio of rental-derived EBITDA to interest expense at above 4.5x on a sustained basis
-Financial leverage at below 4.5x on a sustained basis
Fitch Ratings (Thailand) Limited has affirmed community-mall developer and operator Siam Future Development Public Company Limited's (SF) National Long-Term Rating at 'BBB+(tha)' with a Stable Outlook. Fitch has also affirmed the National Short-Term Rating at 'F2(tha)' and national senior unsecured rating at 'BBB+(tha)'. The National Long-Term Rating incorporates a two-notch uplift from SF's Standalone Credit Profile (SCP) for support from its stronger 99.7% parent, Central Pattana Public