CREDIT ANALYSIS REPORT

TALAM TRANSFORM BERHAD

Report ID 605283 Popularity 193 views 10 downloads 
Report Date Oct 2020 Product  
Company / Issuer Talam Transform Bhd Sector Construction
Price (RM)
Normal: RM500.00        
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Rationale
MARC has maintained its rating of CIS on Talam Transform Berhad’s (Talam) outstanding RM40.0 million Settlement Bithaman Ajil Islamic Debt Securities (Settlement BaIDs) as at June 5, 2020. Under the restructuring exercise undertaken by Talam in March 2019, the maturity date of the Settlement BaIDs was extended by 18 months to December 28, 2020 from June 28, 2019.

The rating considers Talam's weak financial position, limited business prospects as well as continued reliance on asset disposals to meet its financial obligations. Talam has been disposing land parcels in the Klang Valley to meet its financial obligations in the past but the process has stalled in recent years. MARC is of the view that the group would face uncertainties in executing timely asset disposals given the prevailing weak property market sentiment that has been exacerbated by the economic impact from the COVID-19 pandemic. The sub-prime locations of its remaining landbank is also a restrictive factor. In view of these factors, the maturity date of Talam's Settlement BaIDs is highly likely to be extended. 

At end-February 2020, the group’s combined 928.3 acres of unencumbered land parcels have an estimated value of about RM661.0 million. The outstanding balance under the Settlement BaIDs is partially secured against property units in Taman Puncak Jalil, Bukit Jalil, with an aggregate value of RM9.8 million as at end-February 2020, providing a low security coverage of 0.24x. 

During the first quarter of the financial year ended March 31, 2021 (1QFY2021), revenue was minimal at RM1.7 million due to the temporary halt in construction activities arising from the imposition of the movement control order (MCO). Talam registered considerably lower revenue of RM44.9 million in FY2020 (FY2019: RM71.9 million), mainly on weaker land sales and lower contribution from the construction segment. Excluding a one-off gain of RM33.4 million arising from the claims settlement, the losses before tax widened to RM31.6 million (FY2019: losses of RM27.5 million). This led to negative cash flow from operations (CFO) of RM6.0 million (FY2019: RM75.8 million). Its liquidity, as reflected by cash and bank balances of RM2.5 million at end-June 2020, remained weak in relation to its sizeable financial obligations.

Major Rating Factors

Challenges/Risks
  • Weak financial position; 
  • Reliance on asset disposals; and
  • Uncertainties in disposing assets on a timely basis to meet financial obligations.

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