TALAM TRANSFORM BERHAD - 2018

MARC has downgraded Talam Transform Berhad’s (Talam) RM134.2 million Settlement Bithaman Ajil Islamic Debt Securities (BaIDs) rating to C_IS from B-_IS.

The downgrade reflects the increased uncertainty of Talam’s ability to meet its upcoming final BaIDs payment of RM52.1 million on June 28, 2019. Talam has been undertaking asset disposals, particularly land parcel sales in the Klang Valley, to meet its financial obligations in the past but the process has stalled partly due to the current weak property market. It has a sizeable land bank of 962.9 acres, of which the company has estimated its unencumbered portion to be valued at about RM680 million as at end-April 2018.

For financial year ended January 31, 2018 (FY2018), the group recorded a significant 49.8% y-o-y decline in revenue to RM56.7 million largely due to lower sales of land parcels. It recorded pre-tax losses of RM21.9 million. Total borrowings stood at RM109.9 million including the BaIDs, and cash reserves amounted to RM7.3 million as at end-1QFY2019. The rating agency understands that Talam has pending land sales totalling RM114.8 million, from which the group expects to receive net cash of about RM18.9 million in FY2019. Although new land divestment could ease the pressure on its liquidity, MARC expects timely asset disposal to be challenging.

The outstanding BaIDs are partially secured against property units and a land parcel in Taman Puncak Jalil, Bukit Jalil, with an aggregate value of RM18.7 million as at end-April 2018, providing a low security coverage of 0.36 times.

Major Rating Factors

Challenges/Risks

• Weak business and financial position; and
• Challenging conditions to dispose assets on a timely basis to meet financial obligations.