The rating of AID/ MARC-2ID (A flat, Islamic Debt) assigned to Peremba Jaya Holdings Sdn Bhd’s (PJHSB) (a subsidiary of PECD Berhad) RM200 million MUNIF/MMTN facility reflects the strength of the security arrangement, whereby specific assignments of proceeds in respect of the government quarters contracts under Precinct 11 will serve as the funding source for the redemption of the notes issued; and the minimal demand risk as the government quarters would be delivered and handed over to Putrajaya Holdings Sdn Bhd (rated AAA by MARC). The rating is, however, moderated by the construction risks associated with the project and sensitiveness of the cash flow to delays in collection of receivables.

PJHSB is currently the developer for Precinct 11, Putrajaya. Precinct 11 covers an area of 1,056 acres, making it the largest residential zone in Putrajaya. PJHSB has completed 2,096 residential units comprising of 104 public units and 1,992 government quarters units under Contract A. It is currently developing another 1,850 units under Contracts B and C which are expected to be completed in 2005. PJHSB is to develop a total of 9,056 residential units and 20 acres of commercial land in Precinct 11 by 2012. The completed government quarters will be delivered and handed over to Putrajaya Holdings Sdn Bhd at an agreed price, in return for having the exclusive right to develop and sell residential and commercial properties in Precinct 11 to the public. Currently, PJHSB is developing 1,850 units of government quarters under contracts B and C. As at March 2004, the average stage of completion was 49.9%, with expected full completion by 2005. Another 1,427 units of government quarters will be developed under Contract D, which is still in the design and approval stage. This development is expected to commence by July 2005 and expected to be completed by year 2008. Construction risk is mitigated given PJHSB’s experience with the completed construction of 1,992 units of government quarters in Precinct 11 under Contract A.

Revenue for the year ended 2003 improved to RM202.50 million from RM120.24 million supported by the completion of Contract A and contributions from Contracts B & C. Operating profit margin also improved to 2.74% compared to 0.93% previously. PJHSB expects both the revenue and margin to improve in the near to medium term with the progressive completion of the government quarters and contributions from the sale of the public units in Precinct 11.

PJHSB’s cash flow position in 2003 was strained by the construction costs in respect of Contracts B and C. The company expects its liquidity position to improve in 2004 as the construction of Contracts B & C reaches an advanced (80%) stage. In the medium term, PJHSB’s cash flow generation capacity would be enhanced by the sales of the public units in Precinct 11 and its other construction projects. Noteholders’ interests are, nevertheless, protected under the issue structure, with the repayment of the MUNIF/MMTN to be met specifically from the proceeds to be received by PJHSB in respect of the completed government units under Contracts B, C and D.

Debt leverage has been increasing over the past few years driven by increasing short term borrowings. The pro-forma debt leverage is expected to increase to 2.37x. PJHSB expects its debt leverage to gradually decrease with the progressive retirement of the MUNIF/MMTN commencing three and a half years from the date of first issuance.