The ratings of MARC-2/A- assigned to Equine Capital Berhad’s (ECB or Issuer) Commercial Papers /Medium Term Notes Programme of up to RM95 million (CP/MTN Programme) reflect the ECB group’s strong competitive position through its flagship developments in Seri Kembangan and its credible track record of timely completion of quality projects. Mitigating the ratings is the inherent cyclicality of the property industry.

The ECB group is an integrated group of companies principally involved in property development. Its flagship development comprise Taman Equine, Putra Permai and Pusat Bandar Putra Permai which collectively forms the back bone of Bandar Putra Permai. Located at Seri Kembangan, a growth region within the Multimedia Super Corridor, these developments have to date recorded strong take-up rates. Given the competitive pricing, location, built quality and track record of timely completion of projects that have been exhibited by the ECB group, MARC expects demand for future launches under these developments to remain strong. The ECB group’s future development thrust will continue to be its Seri Kembangan developments with contributions from two additional developments in Ampang. Estimated GDV for the remaining planned launches is approximately RM914.5 million spread over the next seven years.

The ECB group sub-contracts all construction works to its panel of sub-contractors who have proven to be
reliable and timely in the past. Contracts are awarded on an open tender basis, hence allowing some measure of cost control. Furthermore, by sub-contracting all construction works, the ECB group’s cost structure is somewhat protected from industry-wide problems such as labour shortage and price hikes in raw materials.

Under the issue structure, refinancing risk will be largely mitigated by reduction schedule of the CPs, the serial redemption structure of the MTNs and the built up of monies in the Debt Service Account for the CPs and Debt Service Account for the MTNs. Liquidity risk is addressed by the maintenance of a pre-funded 6 months coupon payment for the MTNs in the Debt Service Reserve Account (DSRA).

The ECB group’s debt servicing capacity has historically been positive and this is expected to continue for the duration of the facility. MARC’s sensitivity analyses on the projected cash flows of the assigned phases reveal a resilient cash flow position under various scenarios of delays in progress billings and increases in development costs.

Going forward, the ECB group is expected to record strong profitability on the back of favorable outlook for the property market and good take-up rates for its properties. ECB’s pro-forma debt-equity ratio is expected to be below one time. The consolidated debt equity ratio is capped at 1.75 times under the issue structure.