TEXT-Fitch Affirms Siam Future Development; Rates THB750m Bonds 'BBB(tha)'

Fri Feb 15, 2013 1:03am EST

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(The following was released by the rating agency)

BANGKOK/SINGAPORE/SYDNEY, February 15 (Fitch) Fitch Ratings (Thailand) Limited has affirmed Siam Future Development Public Company Limited's (SF) National Long-Term Rating at 'BBB(tha)' with Stable Outlook, its National Short-Term rating at 'F3(tha)' and its outstanding senior unsecured debentures at 'BBB(tha)'.

Simultaneously, Fitch has assigned SF's new issue of up to THB750m senior unsecured debentures due in 2016 a National Long-Term Rating of 'BBB(tha)'. The proceeds will be used to refinance the maturing debentures and a loan from bank.

The ratings reflect SF's strong market position as a leading developer of Thai medium-sized open-air shopping centres. SF's larger portfolio, longer experience and stronger expertise in its niche provide it with a competitive advantage over its peers. SF has a quality shopping mall portfolio with a high average occupancy rate of more than 90% since the opening of its first centre in 1995.

The ratings also reflect SF's secured cash flow from long-term leases. Long-term leases account for about 65% of its total gross leasable area (GLA) and contribute about 35% of total recurring income. Anchor tenants are high-profile and well-diversified companies. The top five largest tenants account for 40% of total GLA while the largest tenant, occupying 17% of total GLA, is a SF-related company. Its new anchor, IKEA store, which is a new franchise in Thailand with a differentiated store concept, also helps enhance SF's tenant profile.

SF faces a limit on rental increase and declining occupancy in some major centres due to a decrease in visitor traffic, following the closure of an anchor tenant at these centres, and keen competition in the neighbourhood. The company is likely to sign up new anchor tenants in late 2013 or early 2014. Growing the recurring income of its existing portfolio will, therefore, be challenging over the next two years while contributions from the new centres should help if they open on schedule. Nevertheless, the average occupancy rate of SF's shopping centres should remain strong at above 90% in 2012-2015.

Fitch expects SF's net adjusted debt/EBITDAR to remain high at about 5.6x-6.1x during 2013-2014 but its FFO fixed charge coverage to improve to 2.3x-2.6x in 2013-2014 from about 2.0x-2.1x in 2012. Given the completion of Mega Bangna, SF will focus on the expansion of its new centres with planned capex of THB850m-THB1bn a year in 2013-2014 and additional GLA of 10,000-20,000 square metres a year.

SF's THB1.4bn debt, including THB1.2bn debentures, will mature within one year from end-September 2012. The company plans to refinance the maturing debt with new debentures, including the aforementioned new debentures. SF's liquidity is also supported by a cash balance and current investments of THB50.7m and undrawn committed bank facilities of THB767m. SF also has the alternative to sell its existing projects to property funds or other operators, if needed.

Rating Sensitivities

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

-Substantial improvement in recurring income

-Funds from operations (FFO) fixed charge coverage above 3.0x on a sustained basis

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

- Deteriorating recurring income

- FFO fixed charge coverage below 2.5x on a sustained basis

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