OSK Property Holdings Bhd - 2009

MARC has affirmed its A-ID rating on OSK Property Holdings Berhad’s (OSKP) outstanding RM17.5 million Class B BaIDS. The rating carries a stable outlook. The rating affirmation and outlook reflect the company’s stable revenue generation from its ongoing developments, its sizeable land bank and its strong liquidity position relative to its near-term debt repayments.

OSKP has continued to register favourable take-up rates for its projects, with its flagship development, Bandar Puteri Jaya in Kedah, achieving a take-up rate of above 85% for its completed mixed-residential developments and its high-end Mont’ Jade  and low- to medium-segment Seremban 3 projects in Seremban recording 76% and 92% take-up rates respectively. The group’s semi-detached houses and bungalow project at Taman Sri Banyan in Kajang has been well received, as indicated by an average take-up rate of 92% as of September 30, 2009. While OSKP’s change in focus to higher-margin niche developments appears to have been successful to date and has increased its visibility as a property developer in the Klang Valley, demand for OSKP’s soon-to-be launched high-end residential segment in the KLCC area could be challenging given the surplus of such developments in the vicinity. 

For the financial year ended December 31, 2008 (FY2008), OSKP’s revenue increased by 16.2% to RM106.7 million (FY2007: RM91.8 million), bolstered by higher sales achieved from its high margin projects, namely Mon’t Jade and Taman Sri Banyan. Profit before tax increased at a higher pace of 77.3% (FY2007: 37.7%) to RM11.7 million (FY2007: RM6.6 million) on the back of additional rental income from the Atria Damansara shopping complex, which was acquired in fiscal 2007. For the first nine months ended September 30, 2009 (9MFY2009), OSKP recorded higher revenue of RM85.9 million (9MFY2008: RM78.4 million), mainly due to higher sales achieved for its Sutera Damansara development. Profit before tax, however, declined by 17.4% to RM7.8 million during the period (9MFY2008: RM9.5 million) on the back of lower sales from the group’s high margin projects. 

For 9MFY2009, OSKP’s debt-to-equity ratio further declined to 0.36 times (FY2008: 0.43 times) following the payments of RM25 million for the final redemption of Class A BaIDS (Tranche 2) and RM7.5 million early partial redemption for the Class B BaIDS (Tranche 3) in April and August 2009 respectively. MARC notes that OSKP’s available cash and cash equivalents of RM41.2 million as of September 30, 2009 are more than adequate to meet the final redemption of the BaIDS amounting to RM17.5 million on April 6, 2010.

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Challenges/Risks