Tris Rating has assigned a rating of AA- (Double A Minus) to DAD Asset Development Co., Ltd. with a “stable” outlook. The rating reflects the certainty of rental income from projects within the Government Complex Commemorating His Majesty the King's 80th Birthday, with expected rental income from commercial area Zone C of approximately 100 million baht per year during 2025-2026.

Dr. Nalika Tipak Saengsanit, Managing Director of DAD Asset Development Co., Ltd., which manages the Government Complex Commemorating His Majesty the King's 80th Birthday, revealed that Tris Rating has assigned a credit rating of “AA-” (Double A Minus) for the year 2023, with a stable outlook.

Tris Rating analyzed data considering DAD's rental income, which is quite certain and predictable from various government agencies, close control in project development, and funding sources from relevant government agencies, including the possibility of DAD receiving financial support from the government if necessary. These factors help alleviate Tris Rating's concerns regarding the risks in project development, despite a relatively high debt level. This rating reflects a strong relationship with the government, as DAD is a state enterprise under the Ministry of Finance, with a board mostly composed of government agency representatives, indicating close government involvement in DAD's operations.

Since its establishment, DAD has completed 6 development projects, including the Government Complex Commemorating His Majesty the King's 80th Birthday in Zones A and B. Currently, there are 4 projects under development, including the Government Complex Commemorating His Majesty the King's 80th Birthday in Zone C, and 9 projects are under feasibility studies. The investment in the Government Complex Commemorating His Majesty the King's 80th Birthday in Zone C will have a 30-year lease agreement with the Treasury Department, ensuring DAD will have guaranteed rental income from this project throughout the lease term, starting to receive rent from the Treasury Department in September 2024. Additionally, DAD has 13,000 square meters of commercial rental space in Zone C of the Government Complex, which is currently in the process of tenant recruitment, with expected rental income of approximately 80-100 million baht per year in 2025.

Low Project Development Risk

Tris Rating views that DAD has low risks in developing office and residential rental projects because each agency will enter into long-term lease agreements with DAD and budget annually for office rental payments, which can cover all operational costs and investments of DAD. For residential projects owned by other government agencies, each agency is responsible for investment and tenant recruitment, while DAD will receive compensation in the form of construction supervision fees.

For the Rama-Treasury Senior Housing Project, DAD will develop the project itself, responsible for marketing, tenant recruitment, construction, and overall project management, including covering all operational costs and investments. DAD will start recognizing revenue once the project is completed and begins delivering each unit to tenants according to the contract terms, which stipulate that construction will commence once full bookings from tenants meet the criteria set by the project management committee. Thus, DAD has low risks even though it must develop the project itself. The project is currently under review for the investment framework and awaits approval from the National Economic and Social Development Council and the Cabinet, with expectations for investment to occur in 2025-2026.

Guaranteed Rental Income to Cover Debt Obligations

Tris Rating comments that although DAD has a high debt level, it will have guaranteed and predictable rental income, primarily from the Treasury Department and government agencies. Additionally, the Public Debt Management Office will closely monitor funding sources and debt repayments. Given DAD's status as a state enterprise fully owned by the government, Tris Rating believes that DAD will receive timely financial support from the government when necessary.

The development of the Government Complex Commemorating His Majesty the King's 80th Birthday in Zone C began construction in mid-2019, using long-term loans from banks as funding sources. To date, DAD has invested a total of 13.6 billion baht from 2019 to 2023, with the financial debt-to-EBITDA ratio increasing to 10 times during 2025-2026 from 7-8 times during 2019-2024. The EBITDA-to-interest expense ratio has been at 2 times over the past five years, as DAD is in the process of investing in various projects.

Continuous Revenue Growth

Therefore, Tris Rating expects DAD to invest 8.6 billion baht in 2024, 5.5 billion baht in 2025, and 1.6 billion baht in 2026, with approximately 80% of this investment allocated for the Government Complex Commemorating His Majesty the King's 80th Birthday in Zone C. Tris Rating anticipates that the financial debt-to-EBITDA ratio will increase to 14 times in 2024, in line with the progress of construction in Zone C, and after the project completion and the company begins to generate rental income, this ratio is expected to improve to 9 times in 2025-2026. It is also expected that the EBITDA-to-interest expense ratio will remain at 2-3 times throughout the forecast period.

Tris Rating notes that DAD has tight financial liquidity but will be able to manage it over the next 12 months. As of December 2023, there are debt obligations due in the next 12 months amounting to 5.2 billion baht, which are long-term loans from banks to support the development of the Government Complex in Zone C. However, DAD has planned to source replacement funding through bond issuance or bank loans.

Conversely, DAD's funding sources as of December 2023 include cash of 0.8 billion baht and short-term investments in fixed deposits of 1.2 billion baht. Additionally, the company has unused short-term loan facilities of 2.6 billion baht and unused long-term loan facilities of 2.5 billion baht. Tris Rating also expects the company's cash flow from operations in 2024 to be 1 billion baht.

However, it is anticipated that during 2024-2026, DAD's total operating income will increase to 3.7 billion baht in 2024 and remain at 5.0-5.5 billion baht per year during 2025-2026, following the delivery of the Government Complex Commemorating His Majesty the King's 80th Birthday in Zone C in mid-2024. The EBITDA is expected to be 3 billion baht in 2024 and grow to 4 billion baht per year during 2025-2026, with total investments throughout the forecast period amounting to 16 billion baht, and the financial debt-to-EBITDA ratio is expected to significantly increase to 14 times in 2024 and gradually improve to 9 times during 2025-2026.