Putrajaya Holdings Sdn Bhd - 2009

MARC has affirmed its AAAID /MARC-1ID and AAAIS ratings on Putrajaya Holdings Sdn Bhd’s (PJH) Islamic debt issuances as follows:-

• RM570 million BBA Bonds Issuance Facility (due 2013)
• RM850 million BBA Bonds Issuance Facility (due 2013)
• RM850 million BBA Serial Bonds Issuance Facility (due 2015)
• RM1.5 billion Murabahah Notes Issuance (MUNIF) Facility (due 2015)
• RM2.2 billion Murabahah Medium Term Notes (MMTN) Programme (due 2021) 
• RM1.5 billion Murabahah CP/MTN Programme (due 2013)
• RM1.5 billion Sukuk Musyarakah Medium Term Notes (MMTN) Programme (due 2033)

The outlook for the ratings is stable. The ratings are premised on PJH’s strong and stable rental streams received from subleasing government buildings to the Malaysian government which fully addresses its financial obligations under the issuance, and the significant financial flexibility afforded by its major shareholders, Petroliam Nasional Berhad (Petronas) via KLCC (Holdings) Sdn Bhd, and Khazanah Nasional Berhad (Khazanah), the government’s investment holding arm.

Under a concession agreement entered with the Malaysian government in 1999, PJH is undertaking the construction and development of government buildings in the federal government administrative centre of Putrajaya. In return, PJH is granted a 25-year lease by the government for the land and buildings, which upon delivery are then subleased back to the government for the same period. The construction project, with Phase I completed in 2001 and Phase II slated for completion by end-2009 and Phase III by end-2010. Phase II ascertained buildings with a built up area of 19.0 million sq ft are completed; meanwhile, the unascertained buildings with a built up area of 6.4 million sq ft are still under construction.

For fiscal 2009, rental receipts from the government buildings amounted to about RM968.9 million, providing sufficient liquidity to meet its financial commitments. In general, the monthly rental rates commenced at RM2.50 per sq ft (though this has been varied for the later parcels) but with an upward revision at an annual compounded rate of 3.0% every three years for a specified period and thereafter at a flat rate for 15 years. The existing BBA Bonds are secured by assignment of sublease payments for the government buildings, while the other facilities are supported by a negative pledge on rental proceeds of government buildings. MARC notes that with the early redemption and cancellation of its RM765 million BBA Bonds on August 28, 2009, the sublease rentals formerly securing the redeemed BBA Bonds will be reassigned to the RM2.2 million Murabahah Medium-Term Notes, as provided for under the terms of the MMTN issuance. 

For the financial year ended March 31, 2009 (FY2009), the group registered a 7% revenue decline to RM1.8 billion (FY2008: RM2 billion), largely attributable lower proceeds from government quarters due to slower progress of the Phrase III. Apart from rental income, PJH receives progressive billings from the government for the development of the balance 7,854 units of the total 16,660 units of government quarters (Phrase II & III) under separate design and build agreement. Apart from rental income, PJH receives progressive billings from the government for the development of 16,660 units of government quarters (Phase II and Phase III) under a separate design and build agreement. With the project nearing completion, MARC foresees reduced contract income in the near term. PJH’s operating profit margin improved to 52.5% in FY2009 (FY2008: 47.1%), primarily due to the RM110 million gain on disposal of shares in Putrajaya Perdana Berhad, an affiliate company. As a result, the group’s profit before tax increased by 12.1% to RM666.5 million (FY2008: RM594.5 million). In the same period, the group’s cash and cash equivalents increased to RM361.7 million in FY2009 (FY2008: RM248.3 million). PJH recorded higher operating cash flow of RM950.8 million in FY2009 (FY2008: RM709.9 million) due to higher receipts from customers and other income received, but cash flow from investing posted a higher deficit of RM519.3 million (FY2008: - RM487.7 million), primarily due to continuous large cash outflow for capital expenditure and the acquisition of Gas District Cooling (Putrajaya) Sdn Bhd (GDC) during the year.

MARC notes that PJH’s debt maturity profile continues to be skewed towards long-term debt. With the final redemption of its RM765 million BBA Bonds, the group’s debt-to-equity (DE) ratio further improved to 1.38 times (FY2009: 1.43 times) as of June 30, 2009 (1QFY2010). PJH has ample headroom based on its gearing cap of 4.0 times. PJH’s liquidity position and financial flexibility remains strong. As of 1QFY2010, its available unutilised credit lines amounted to RM2.615 billion while cash and bank balances stood at RM838.5 million against  short-term borrowings of RM620 million. 

The stable ratings outlook reflects PJH’s strong credit profile via contributions from sublease rentals, supported by its position as the main concessionaire for the development of the federal administrative centre in Putrajaya.

Major Rating Factors

Strengths