Reuters logo
Fitch Assigns CP ALL's New Unsecured Bonds at 'A-(tha)'
March 23, 2017 / 6:58 AM / 9 months ago

Fitch Assigns CP ALL's New Unsecured Bonds at 'A-(tha)'

(The following statement was released by the rating agency) BANGKOK, March 23 (Fitch) Fitch Ratings (Thailand) Limited has assigned CP ALL Public Company Limited's (CP ALL, A(tha)/Stable) new senior unsecured bonds a National Long-Term Rating of 'A-(tha)'. The bonds, totalling up to THB4.5 billion, will be due in 2029. The proceeds will be used to repay the Thailand-based retailer's maturing bonds. The rating on the senior unsecured bonds is one notch lower than CP ALL's 'A(tha)' National Long-Term Rating due to a significant amount of prior-ranking debt, which made up 3.5x of the company's EBITDA in 2016. KEY RATING DRIVERS High Financial Leverage: Fitch expects CP ALL's FFO-adjusted net leverage to remain high at above 3.5x beyond 2018. Deleveraging at CP ALL has been slower than we had expected because of a weak domestic economy in past two years. Sale of shares in subsidiary Siam Makro Public Company Limited (Makro) is also unlikely to take place in the next 12 months, in our view. Moderate-but-Defensive Growth: Fitch expects CP ALL's sales to increase by 9%-10% a year in 2017-2018, driven mainly by new store openings and a recovery in same-store sales growth to 3%-4% a year for both 7-Eleven and Makro stores (2016: 2.4% and 4.1%, respectively), in line with the domestic economic recovery. The company also continues to benefit from the "defensive" nature of its business, which sells daily essentials with low revenue and margin volatility; its medium-term growth potential is still supported by Thailand's immature market for modern-food retailing. Leading Market Position: We believe CP ALL is likely to maintain its leading position despite intense competition. The company has more than 9,500 stores nationwide, and a more-than-60% share of the convenience-store market in Thailand, far more than its closest rival. Its dominance is supported by its large network and coverage area, along with well-established functions such as logistics, supply and maintenance, and staff training and development. Strong Retail Brand: CP ALL operates 7-Eleven stores, a leading international brand of convenience chain stores. CP ALL was granted an area licence agreement for Thailand from 7-Eleven, Inc., USA, with the first store opening in 1989. Thailand is now the second-largest international licensee of 7-Eleven, Inc., after Japan. DERIVATION SUMMARY CP ALL has a strong domestic market position as the largest convenient store chain in Thailand, similar to The Siam Cement Public Company Limited (SCC, A(tha)/Positive), the largest cement and downstream petrochemicals producer in Thailand and Thai Oil Public Company Limited (TOP, AA-(tha)/Stable), the largest oil refiner in Thailand. However, CP ALL has a stronger competitive position with its market share significantly larger than that of its closest rival. CP ALL also has lower business risk than SCC and TOP, which are exposed to cyclical demand for their products and the fluctuation of commodity price, reflected by CP ALL's more stable level of EBITDAR margin. CP ALL's financial leverage is, however, significantly higher than both peers, due to the debt incurred from the leveraged buy-out of Makro in 2013. Given the sector's low capital intensiveness, CP ALL's financial leverage should decrease over time. CP ALL's lower business risk should compensate for its higher financial leverage than SCC. On the other hand, the financial leverage of TOP, which is very low at about 1.0x, warrants its higher rating. TOP's credit rating is also notched up to reflect its linkage to the PTT group. KEY ASSUMPTIONS Fitch's key assumptions within our rating case for the issuer include: - Revenue growth of 9%-10% per year in 2017-2018; - EBITDAR margin to improve to 10.2%-10.4% in 2017-2018; - 700 new 7-Eleven stores per year in 2017-2018 and four new large-format stores per year for Makro in 2017-2018. RATING SENSITIVITIES Positive: Developments that may, individually or collectively, lead to positive rating action include: - FFO-adjusted net leverage at less than 3.5x (end-2016: 5.4x). Negative: Developments that may, individually or collectively, lead to negative rating action include: - A failure to reduce FFO-adjusted net leverage to below 4.5x by 2018. - Deterioration in EBITDAR margin to below 7.5% on a sustained basis (2016: 10.1%). LIQUIDITY Strong Liquidity: CP ALL had total debt of THB199 billion as of end-2016. About 15.8% will be due in the next 12 months from end-2016. About 96% of its total debt is Thai baht bonds, 67% of which are secured by Makro shares. The liquidity is mainly supported by its cash and current investment of THB34.8 billion, its strong cash flow generation as well as its strong accessibility to debt capital market. Contact: Primary Analyst Somruedee Chaiworarat Director +66 2108 0160 Fitch Ratings (Thailand) Limited Level 17, Park Ventures, 57 Wireless Road, Lumpini, Patumwan, Bangkok 10330 Secondary Analyst Nichaya Seamanontaprinya Associate Director +66 2108 0161 Committee Chairperson Vicky Melbourne Senior Director +612 8256 0325 Date of Relevant Rating Committee: 22 September 2016 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Additional information is available on Applicable Criteria Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage - Effective from 17 August 2015 to 27 September 2016 (pub. 17 Aug 2015) here National Scale Ratings Criteria -- Effective Oct. 30, 2013 - March 7, 2017 (pub. 30 Oct 2013) here Parent and Subsidiary Rating Linkage (pub. 31 Aug 2016) here Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit Analysis (pub. 29 Feb 2016) here Additional Disclosures Solicitation Status here Endorsement Policy here 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 WEB SITE AT 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. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below