CREDIT ANALYSIS REPORT

UEM SUNRISE BERHAD - 2020

Report ID 605387 Popularity 541 views 37 downloads 
Report Date Jan 2021 Product  
Company / Issuer UEM Sunrise Bhd Sector Property
Price (RM)
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Rationale
MARC has affirmed its MARC-1IS /AA-IS ratings on UEM Sunrise Berhad’s two Islamic Commercial Papers and Islamic Medium-Term Notes programmes (ICP/IMTN-1 and ICP/IMTN-2) with a stable outlook. Each of the ICP/IMTN programmes has a limit of RM2.0 billion with a sublimit of RM500.0 million on the ICP issuances. 

The affirmed rating is driven by UEM Sunrise’s healthy track record as a property developer, its large unbilled sales as well as its sizeable landbank that are supportive of future development activities remain key rating drivers. These factors are counterbalanced by the tough environment for domestic property developers that is likely to be exacerbated by the impact from the COVID-19 pandemic. UEM Sunrise’s long-term rating benefits from a one-notch uplift for parental support based on the rating agency’s assessment that the company is a strategic subsidiary of its parent UEM Group Berhad, a government-related entity with a strong and diversified profile.

With the recent completion and near-full delivery of its two condominium projects in Melbourne, Australia which have a combined gross development value (GDV) of RM3.2 billion, the group’s ongoing developments currently comprise 22 domestic projects with a combined launched GDV of RM12.0 billion. UEM Sunrise is also undertaking two joint-development projects, Radia in Bukit Jelutong and The Maris in Desaru, with a combined GDV of RM1.0 billion. Save for two new projects, Aspira Gardens (launched GDV: RM34 million) and Senadi Hills (launched GDV: RM105 million) in Johor, the group’s wholly-owned projects have been well received, garnering an overall take-up rate of 86.5% as at end-November 2020. During the year, UEM Sunrise also launched two new phases of landed residence under its Serene Heights Bangi township (GDV: RM134 million) as well as a high-rise development, Residensi Allevia in Mont’ Kiara (GDV: RM545 million). 

For 9M2020, UEM Sunrise recorded lower revenue of RM525.3 million which partly reflects the completion of its Australian projects in the corresponding period last year. Further hampering revenue generation was the suspension of sales and progress billings during the movement control order (MCO) period in 2Q2020. The group also registered pre-tax losses of RM130.4 million during 9M2020 due to write-downs in completed inventory, foreign exchange losses and weaker performance of its joint ventures. Going forward, the group’s unbilled sales of RM1.7 billion would provide earnings visibility through 2022.

Group borrowings stood at RM4.46 billion, translating to a debt-to-equity (DE) ratio of 0.60x as at end-9M2020 (end-December 2019: RM3.39 billion, 0.44x). The increase in borrowings was largely attributable to issuances under the rated sukuk programme, proceeds from which will be used to redeem maturing notes over the near term. Net DE has remained modest at 0.39x. The group’s liquidityposition will be supported by the receipt of proceeds from the en-bloc sale of serviced apartments in its Australian Aurora Melbourne Central project for AUD125 million as well as other future proceeds from land and asset sales totalling RM646.8 million. 

Major Rating Factors

Strengths
Significant track record in property development;
Sizeable landbank; and
Improving financial metrics. 

Challenge/Risk
Challenging domestic property market prospects.


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