Fitch Ratings (Thailand) yesterday revised the outlook for its credit rating on Land & Houses Plc (LH) to negative from stable, while affirming its A- national rating.

Fitch said the revision reflected the more aggressive financial plan of the country's largest residential developer, resulting from a high interim dividend payout and the increasing financial burden of its subsidiary Land and Houses Retail Bank, while income prospects remained weak.

LH's earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 35% year-on-year to 1.8 billion baht in the first half of 2006, due to a slowdown in the property market.

But it paid 1.4 billion baht in dividends in September, in line with its policy of a 100% dividend payout.

Meanwhile, the need for working capital for the banking subsidiary has increased. LH's debt rose to 13.4 billion baht in the first half of this year, from 10.7 billion at the end of last year. Its debt was expected to rise further in the second half of the year, Fitch said in a statement.

"Despite its weaker operating performance, LH's financial policy appears less conservative, especially on dividend payouts," the rating agency said.

Fitch noted that LH had indicated a dividend policy of at least 70% for 2007 and 2008.

Liquidity has remained manageable, however, with a cash balance of 965 million baht and 1.4 billion baht worth of credit lines. The company's ability to access the local capital market and sizable holdings of liquid securities also help support its liquidity profile.

As well, Fitch said, LH was expected to realise strong cash flows from sales and asset liquidations in 2007.

LH benefits from its extensive land bank and economies of scale from large pre-built detached housing projects, it said.

The company's founder, Anant Asavabhokin, remains its largest shareholder with a stake of 30.6%, followed by the Government of Singapore Investment Corporation with 13.27%.

LH shares closed yesterday on the Stock Exchange of Thailand at 8.30 baht, down 20 satang, in trade worth 268.86 million baht.

Source: Bangkok Post Saturday November 4, 2006