By The Nation
The ratings reflect AP’s strong market position, driven by its growing revenues and stable profitability, its sizeable backlog which secures a portion of its future revenues, and its balanced products portfolio.
These strengths are partially offset by AP’s moderate use of financial leverage and the cyclical and competitive nature of the residential property development industry.
The impact from the new loan-to-value (LTV) lending rules set by the Bank of Thailand (BOT) and a persistently high level of household debt nationwide could affect the demand for housing over the next few years.
TRIS Rating expects AP to maintain its strong market position in the next five years. The size of AP’s revenue base has ranked it fourth among the property developers listed on the Stock Exchange of Thailand (SET) over the past five years.
AP’s revenues have grown from Bt20.3 billion in 2016 to Bt27.7 billion in 2018. Its operating profit margin has been maintained at around 14-16 per cent while its pretax return on permanent capital stood at around 10-12 per cent.
The growth in revenue was driven mainly by a 35-per cent increase in its landed property segment. The operating margin (operating income before depreciation and amortisation as a percentage of revenue) was 13.8 per cent in 2018, decreasing from 15.5-17.0 per cent during 2015-2017.
This ratio dropped because the company accelerated the sales of finished units in the stock of condominium projects with a lower gross profit margin. The gross profit margin of the condominium segment in 2018 was only 29 per cent, declining from 35-37 per cent in the past three years. However, due to the higher share profit from its joint ventures (JV), AP’s pretax return on permanent capital improved to 11.2 per cent in 2018, from 10.5 per cent in 2017.
In TRIS Rating’s view, AP benefits from economies of scale, strong bargaining power with contractors and material suppliers, improving brand recognition, and accessibility to the capital market.