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Fitch: Pressure Mounting on Thai Property and Retail Sectors
May 22, 2014 / 6:07 AM / 4 years ago

Fitch: Pressure Mounting on Thai Property and Retail Sectors

(The following statement was released by the rating agency) BANGKOK/SYDNEY/SINGAPORE, May 22 (Fitch) The outlook on some of our Thai property and retail corporate ratings could come under pressure during 2H14 if protracted political instability intensifies the country's economic downturn, Fitch Ratings says. We believe most other corporate sectors - including large industrial, energy-related, and telecoms companies - are in a stronger position to weather the political impasse. The most affected sectors are those exposed to declining consumer confidence. Property developers and retail operators have been reporting weaker operating performance since the onset of political instability in 4Q13, and rating headroom has therefore narrowed across both sectors. In contrast, telecom, oil & gas, petrochemicals, and building materials companies still reported robust operating results in 4Q13 and 1Q14. Residential property developers are highly vulnerable to the economic slowdown. Presales of leading residential developers fell sharply in 1Q14, including those for Prueksa Real Estate, Sansiri, Land and Houses, and AP Thailand. This was especially the case for their condominium projects, where construction delays compounded the sales drop. Nevertheless, we expect revenues to be maintained or to grow slightly in 2014, supported by the recognition of their strong backlog of pre-sales and a high level of completed projects ready to transfer. Commercial property developers are less affected. The average commercial occupancy rate in 1Q14 for Bangkok and its suburban areas remained above 95%, according to Colliers International. Most of the commercial property developers' income comes from rental income which is buffered by long-term lease agreements, even though some discounts on rental were given to tenants in areas affected by the political rallies during 4Q13 and 1Q14. In the retail sector, the leading superstores - Tesco Lotus and Big C - have been posting declining yoy same-store sales of 3%-9% on a quarterly basis since 2H13. CP All's leading convenience store chain 7-Eleven saw its yoy same-store sales dip in 1Q14. However, the sole modern cash & carry operator in Thailand - Siam Makro, also a subsidiary of CP ALL - managed to maintain positive yoy same-store growth in 1Q14. In the case of consumer staples, the impact on sales should be limited, as a large portion of their product offerings are demand inelastic. Fitch believes these retailers have the ability to re-adjust their product mix, launch promotional campaigns, and implement cost-control measures to manage their sales and margins. In the telecoms sector, overall service revenue for the major mobile operators AIS and DTAC in 1Q14 was stable yoy, as strong growth in non-voice or data service revenues offset a sharp drop in voice service revenue. Fitch expects the operators' earnings and margins will continue to benefit from lower regulatory costs as more subscribers migrate across to their new 3G entities. Oil, gas and petrochemical sectors are also better prepared for economic weakness, as most of their revenues are derived from export markets. Contact: Somruedee Chaiworarat Director +66 2 108 0160 Fitch Ratings (Thailand) Limited Level 17, Park Ventures, 57 Wireless Road, Lumpini, Patumwan, Bangkok 10330 Nichaya Seamanontaprinya Associate Director +66 2108 0161 Obboon Thirachit Director +66 2 108 0159 Matt Jamieson Head of APAC Research - Corporate Ratings Group +61 2 8256 0366 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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