MARC has reaffirmed Sunrise’s short term and long term debt rating at MARC-1ID, and A+ID respectively, reflecting Sunrise’s strong financial track record with operating margins averaging 23% in the last four years, low debt leverage position and high financial flexibility. The ratings were also underpinned by the company’s established position as a high-end developer, with several new launches and healthy cash flow generation capacity, going forward. Moderating factors would be the cyclical nature of the property industry attributable to the movement of the interest rates, price volatility of raw material components, the sensitivity of the cash flow to changes in the revenue stream and the potential impact on Sunrise’s profit margins due to their limited land bank in Mont’Kiara. Nevertheless, projects that have been launched on these developed lands are expected to continue contributing substantially over the next few years till 2011. Sunrise has also, more recently, purchased a few parcels of land and entered into joint-venture agreements with certain land owners in Mont’Kiara, in order to continue expanding its land inventory.

Sunrise has been able to maintain a strong competitive edge, evidenced by the high take up rates in most of its projects in Mont’ Kiara. This can be attributed to the good location of its flagship development, Mont’ Kiara, which is well known for its strong brand name, quality finishing, award winning designs, timely delivery of products and its ability to price its properties at a premium.

Based on the un-audited results for financial year ended 30 June 2006, the group posted a revenue and pre-tax profit of RM359.2 million and RM42 million as compared with RM367.7 million and RM150 million respectively for the previous financial year. This represents a 2% decrease in revenue and 72% drop in pre-tax profit as compared to the previous year’s results. The drop in pre-tax profit during the year was mainly due to the provision of impairment loss totaling RM87.4 million for several of the group’s land in Kajang, Mersing and Carlingford, New South Wales. Despite lower profit during the year, the provision did not affect the group’s sales, operations and cash flows. The group is expected to be profitable going forward with its substantial locked in sales coming from Kiara Designer Suites, Banyan, Solaris Mont’Kiara, Solaris Dutamas and Meridin.

The group’s cash flow from operations for financial year ended 30 June 2006 increased significantly to RM153 million compared to RM45 million in the previous year. The increase was mainly due to positive changes in the working capital.

Overall, the group’s debt leverage has been stable for the last two years under review. The favourable debt leverage position is also well within the 1.0x debt-equity cap stipulated under the issue structure. Proforma debt to equity assuming a RM150 million drawdown is 0.70x which is below the covenanted debt-equity level. Projected financial position shows a relatively low debt-equity position for the tenure of the facility.