Combating COVID-19 with Resilience Tris Rating Affirms WHA Group at A-

TRIS Rating affirms the company rating of WHA Corporation PLC (WHA) and the ratings of WHA’s senior unsecured debentures at “A-” despite the COVID-19 pandemic. The recent ratings reflect WHA Group’s superior financial position, due to its decades of experience as a leading industrial property developer and its sizable recurring income from rental properties, utilities services and dividends from its power plant business. On top of that, the continued asset monetization to WHART and HREIT in Q42020 will provide additional financial flexibility.

“The COVID-19 has impacted WHA Group’s 4 businesses differently, as Logistics Hub is a sole beneficiary of E-Commerce boom while our Industrial Development faces a short-term impact due to the country’s travel restrictions, with foreign investors not allowed in. But it is important to note that land sales are not the only source of revenue of our industrial estate business, as there are large revenues from other services expected by the end of this year.”

The ratings continue to reflect WHA Group’s strong competitive position and proven track record in built-to-suit warehouses and industrial estate development. The company is a top-tier provider of built-to-suit warehouses for rent to leading MNCs and big conglomerates in Thailand, with an extensive track record of total leasable area of over 2.4 million sq.m. under ownership and management. As the number 1 industrial estate developer, the company develops and operates 12 Industrial Estates in Thailand and Vietnam.

The company has established strong relationships with its more than 900 customers, making it a crucial contributor of future economic growth. Thailand is becoming more attractive as a Foreign Direct Investment destination and a driving force to reduce overall logistics costs and to enhance the country’s long-term competitiveness through the transfer of technological knowledge and knowhow.

“Our track record in this business has generated a sizable base of recurring income from rental properties, utility services, and dividends from the power business. Despite the sluggish economy and uncertainties due to COVID-19, demand for rental properties has markedly increased. This is due mainly to the rapid growth of the E-commerce sector during the pandemic, continuing momentum of demand growth for warehouses and factories for the foreseeable future, following the shift of consumer behavior towards the online channels.”

Our Industrial estate business faced a short-term impact as foreign investors cannot travel due to border closure. However, we have seen an overwhelming demand from Chinese, Taiwanese and Japanese investors. Manufacturers are looking to diversify their production bases outside China, as a result of US-China trade tension and to minimize impact from supply chain disruption.

Similarly, our Utilities and Power business sees a positive outlook from relieved drought and COVID-19 situation. WHA Utilities and Power Plc. (WHAUP) will continue to broaden its power portfolio, as it plans to commission solar rooftop projects with a total capacity of 15-20 MW during the second half of 2020. By the end of this year, WHAUP should achieve a total installed equity around 590 MW. For the water business, as major customers resume their normal business and new customers start their operations, overall water consumption shall be back to previous levels. Revenue of the second half shall, therefore, improve with potential upside from price adjustment, better product mix and additional revenue from power business. The business model of 4 business hubs leads to a well-balanced income portfolio between recurring vs non-recurring revenue, resulting in our ability to withstand uncertainties and adapt positively.

In Quarter 4/2020, the company plans to inject assets with a total value of not more than Baht 3,234 million into WHART and assets with a total value of not more than Baht 1,357 million into HREIT, respectively. The total asset monetization value shall, therefore, not exceed Baht 4,591 million. Currently, SEC already approved the filings and the company has set the expected timeline for asset transfer to December this year.

For next year, the company is already preparing its operating cash flow and securing a credit facility from financial institutions to meet any repayment obligations, as well as to support WHA Group’s business expansion in the future.