The "stable" outlook reflects the expectation that RML will be able to develop and deliver its residential projects as scheduled. RML's credit upside would materialize if the company is able to prove the continuation and execution of new projects launched while keeping operating margin at 10%-15% and maintaining the debt to capitalization ratio below 55% or the interest-bearing debt to equity ratio below 1.5 times on a sustainable basis. On the contrary, the rating and/or outlook could be revised downward if RML's operating performance and/or financial position further deteriorated from the target levels.
RML was established by Mrs. Jurairat E. Bonithern in 1987 and listed on the Stock Exchange of Thailand (SET) in 1994. The company was under rehabilitation from 2000 through 2003. Its major shareholders have changed several times. Seamico Securities PLC became the company's largest shareholder in 2002, then the Teigen family took over it in 2005. Istithmar Hotels FZE and IFA Hotels & Resorts 3 Ltd. (IFA) became the major shareholders of RML in late 2006. In February 2013, JS Asset Management Pte. Ltd. (JS) purchased a 24.98% stake in RML from IFA, and thus became the major shareholder. JS is a Singaporean investment holding company, owned entirely by Mr. Lee Chye Tek Lionel. Mr. Lee is also the owner and the group chief executive officer of Jit Sun Investment (Jit Sun). Jit Sun's businesses include offshore oil and gas services, engineering and ship construction for the offshore and marine industries, a boutique hotel, and food & beverages.
RML mainly focuses on the high-end condominium segment, with selling prices ranging from Bt85,000 to Bt400,000 per square metre (sq.m.). As of September 2015, RML had six active condominium projects and one existing housing project, with a total project value of Bt39,000 million. The value of two projects, The River and 185 Rajadamri, comprised 63% of the portfolio. At the end of September 2015, the value of the remaining unsold units (including built and un-built units) was Bt5,900 million. RML had a backlog worth Bt6,900 million to be transferred to customers during the last quarter of 2015 through 2018.
Due to inconsistent launch of new projects, RML's operating performance has fluctuated. Total revenue during 2008-2011 ranged from Bt1,163 million to Bt3,245 million. Revenue soared to Bt5,449 million in 2012 and Bt5,681 million in 2013, as RML transferred the finished units in The River project to customers. Total revenue in 2014 grew by 16% year-on-year (y-o-y) to Bt6,581 million, due primarily to the transfer of units in the 185 Rajadamri project. Revenue during the first nine months of 2015 dropped by 27% y-o-y to Bt4,106 million.
With projects in prime locations and high down payments of 25%-40% of the selling price, the units in the backlog are expected to be transferred to customers as scheduled. As a result, total revenue for the full year of 2015 is expected to be around Bt4,900 million. RML's total revenue over the next three years will be partly secured by the backlog worth Bt4,200 million in 2016, Bt1,300 million in 2017, and Bt600 million in 2018.
RML's profitability has improved since 2012, once the company started to deliver the finished condominium units in The River project in 2012 and in the 185 Rajadamri project in 2014. The operating margin (as measured by operating income before depreciation and amortization as a percentage of sales) increased to 18%-20% during 2012-2013 and significantly improved to 27% in 2014 and 25% in the first nine months of 2015. The net profit margin rebounded to around 10% during 2012-2013 and around 18%during 2014 through the first nine months of 2015, up from -41% in 2011 and 2% in 2010. RML's operating margin is expected to decline over the next three years since the gross margin of uncompleted projects is lower than that of The River and the 185 Rajadamri projects. However, RML's operating margin is expected to stay around 10%-15% on a sustainable basis.
RML's financial leverage during 2007-2013 was weaker than those of most listed property developers. The debt to capitalization ratio ranged from 58% to 92%. The ratio improved to 50% as of December 2014 and 43% as of September 2015. The transfer of finished units in the 185 Rajadamri project in the beginning of 2014 unloaded the company's debt burden on its balance sheet. Under TRIS Rating's base case scenario, RML's debt to capitalization ratio is expected to stay below 55% despite its plan to invest more in residential projects and recurring-income assets over the next three years. RML's liquidity is adequate. At the end of September 2015, RML's cash on hand was around Bt350 million and undrawn committed facilities was around Bt1,600 million. Its debt due over the next 12 months is around Bt2,000 million.
Raimon Land PLC (RML)
Company Rating: BBB-
Rating Outlook: Stable