Bluwater Developments Bhd - 2009

MARC has affirmed the ratings of Bluwater Developments Berhad’s (Bluwater) RM47 million Bank Guaranteed Commercial Papers (CPs) and RM130 million Bank Guaranteed Serial Bonds (Bonds) at MARC-1(bg) and AAA(bg) respectively. The ratings carry a stable outlook. The affirmed ratings and outlook are underpinned by the unconditional and irrevocable bank guarantee provided by Malayan Banking Berhad (Maybank). Maybank’s current rating of AAA reflects its entrenched market position in Malaysia, good asset quality, resilient recurring earnings base and strong capital position.  

Bluwater’s sole development consists of two components, The Heritage and its adjacent Bluwater Estate, located in Seri Kembangan, Selangor. The development has benefited from its close proximity to the Mines Resort City, a well-known recreational area comprising lakes, theme parks, golf course, hotel and shopping mall. The Heritage, which has an estimated GDV of RM421 million, consists of three components: serviced apartments, retail lots and office blocks. With the exception of one block of serviced apartments, the project, which is nearing completion, has achieved a strong take-up rate.

MARC notes that its other component, Bluwater Estate, will be the main source of earnings for the company. However, this project, covering 247 acres (inclusive of 51-acre Bluwater Lake) and comprising primarily of high-end landed and high-rise residential developments, has had slower-than-expected launches as a result of the challenging property market conditions. Cash flow generated from the Bluwater Estate development, which has an estimated GDV of RM2.4 billion as of June 30, 2009, will fund debt service obligations under the rated issuances in addition to proceeds from sales of identified properties from The Heritage. As at June 30, 2009, Bluwater’s future expected billings from contracted sales (unbilled sales) stood at RM26.8 million.  

MARC’s analysis of Bluwater’s financial profile is based on the company level unaudited results for the financial year ended February 28, 2009 (FY2009). (Audited consolidated accounts were not available at the time of this press announcement. Bluwater is an operating holding company and is the main income generating entity for the group.) Revenue improved to RM75.0 million (FY2008: RM57.9 million) on the back of sale of an office block amounting to RM42.0 million, while pre-tax profit rose to RM0.12 million (FY2008: pre-tax loss of RM3.7 million). Meanwhile, Bluwater generated positive operating cashflow of RM46.5 million compared to negative RM46.0 million the year before, driven by reduced working capital requirements. The company’s cash and cash equivalents increased to RM4.0 million from RM0.72 million a year earlier relative to debt maturities of RM65 million under the rated issuances. As at end-February 2009, the  company’s gearing reduced to  0.94 times (FY2008: 1.44 times). The  group’s operations have been supported by advances from its shareholders in FY2008 and FY2007; however, in FY2009, advances from shareholders have reduced significantly from its peak of RM56.6 million in FY2008 and RM10.7 million in FY2007.  

Bluwater intends to drawdown on its existing bank lines to meet its upcoming RM65 million debt maturities in June 2010 in respect of its outstanding RM40.0 million Bonds and RM25.0 million CPs. Notwithstanding, assurance of timely payment of interest and ultimate repayment of principal of the rated issuances is provided by the bank guarantee from Maybank.  


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