Tue, Oct 22, 2019 page11

• TFCC’s revenue might be flat this year: ratings firm

  KEY ASSET: Rental income from Taipei 101 would likely increase this year, but revenue from the observation deck might fall 3 to 6 percent, due to a lack of Chinese tourists

  • By Crystal Hsu / Staff reporter
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  Taipei Financial Center Corp’s (TFCC, 台北金融大樓) revenue could be flat this year and decline 4 to 6 percent next year due to a decline in Chinese tourists, although growth in rental income might mitigate the problem, Taiwan Ratings Corp (中華信評) said yesterday.

  TFCC owns and operates Taipei 101.

  The projection by the local arm of Standard & Poor’s Global Ratings came after it assigned “twAA-” long-term and “twA-1+” short-term issuer credit ratings to TFCC for the first time.

  The ratings reflect TFCC’s ability to attract high-quality office and retail tenants and international tourists, underpinned by the company’s key asset, Taipei 101, Taiwan Ratings said.

  “We expect the company’s EBITDA [earnings before interest, taxes, depreciation and amortization] margin to decline moderately this year and in 2020, reflecting higher maintenance expense during the period,” the agency said.

  TFCC’s business is divided into three major segments: retail, office and observation deck, which each contributed 40.5 percent, 22.1 percent and 37.4 percent respectively to its operating income last year.

  The nation’s GDP growth of 2 percent would support a mild increase in consumer spending, with retail growth in the prime Xinyi District (信義), where Taipei 101 is located, expected to be stronger than average, Taiwan Rating said.

  Office space demand in Taipei would remain solid over the next two years, driven by organic business expansion and the increasing number of Taiwanese firms that are expanding their operations in Taiwan to cope with the US-China trade conflict, it said.

  Rental income from Taipei 101 would likely increase 4 to 6 percent this year and 2 to 3 percent next year, reflecting an increase in rental rates and stable occupancy of about 96 percent over the period, it said.

  “We expect the limited supply of new office space in the district to drive up rental rates over the next two years,” Taiwan Ratings said.

  However, revenue from Taipei 101’s observation deck might fall 3 to 6 percent this year, which could worsen to 15 to 20 percent next year, due to a likely decline in the number of Chinese tourists, it said.

  Tourists from other countries might increase over the period, but that would not be enough to counter a fall in Chinese tourist numbers, it said.

  Rental income from Taipei 101’s shopping mall would decline by up to 3 percent this year and 2 to 6 percent next year, as sales might soften over the period, Taiwan Ratings forecast.

  Local consumers account for the majority of the mall’s sales, making it less vulnerable to a decline in Chinese shoppers, it added.

  Taipei 101 gives TFCC a strong market position in the domestic office, retail and observation deck business, which in turn gives it above-average profitability, Taiwan Ratings said.

  However, the strengths are tempered by its high asset concentration risk, as Taipei 101 is TFCC’s only asset, it said.
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