CREDIT ANALYSIS REPORT

BERJAYA LAND BERHAD - 2020

Report ID 605388 Popularity 534 views 20 downloads 
Report Date Jan 2021 Product  
Company / Issuer Berjaya Land Bhd Sector Property
Price (RM)
Normal: RM500.00        
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Rationale
MARC has affirmed its ratings on Berjaya Land Berhad’s (BLand) RM500.0 million Medium-Term Notes (MTN) Programme guaranteed by Danajamin Nasional Berhad (Danajamin) at AAA(fg) and RM150.0 million MTN Programme guaranteed by OCBC Bank (Malaysia) Berhad (OCBC Malaysia) at AAA(bg). The ratings outlook is stable. The affirmed ratings reflect the unconditional and irrevocable guarantees provided by Danajamin and OCBC Malaysia. Danajamin carries a financial insurer rating and counterparty rating of AAA/Stable while OCBC Malaysia has a financial institution rating of AAA/Stable based on public information. 

BLand is an intermediate investment holding company with interests in gaming, motors, properties, hotels and recreation. Its financial performance has continued to be weighed down by high finance costs from sizeable borrowings. BLand continues to rely on proceeds from asset disposals and refinancing to address its long-term financial obligations. The group has been affected by the impact of the COVID-19 pandemic that resulted in the temporary business closure of its principal gaming subsidiary, Berjaya Sports Toto Berhad (BToto), while its United Kingdom-based motor retailing business recorded sluggish car sales. BLand’s hotels also registered lower occupancy levels following border closures.

The group’s domestic property development is largely limited to Tropika, comprising apartment units, shops, and retail lots with a total gross development value (GDV) of RM852 million. The project, located in the Bukit Jalil vicinity in Kuala Lumpur, achieved a modest take-up rate since its launch in 1Q2019. BLand’s planned launch in the near term is the Bayu Timur high-rise residential project in Shah Alam with an estimated GDV of RM260 million. Its only foreign property projects in Vietnam with a combined GDV of RM360.6 million have been fully sold.

For financial year ended June 30, 2020, BLand recorded revenue of RM5.2 billion and pre-tax profit of RM185.4 million (FY2019: RM7.3 billion, RM546.4 million). Its profitability was supported by a one-off gain from the disposal of the trust beneficial interest on the hotel component of the Four Seasons Hotel & Hotel Residences Kyoto, Japan by its 50% associated company. Group borrowings, which largely comprise term loans, rose to RM3.6 billion from RM3.0 billion in the previous year. Its liquidity position is supported by cash and bank balances of RM644.2 million as at end-June 2020.

Notwithstanding BLand’s standalone risk factors, noteholders are insulated from BLand’s standalone credit profile by the guarantees provided by Danajamin and OCBC Malaysia. Any change in the supported ratings or ratings outlook would be primarily driven by changes in the credit strength of the guarantors.

Major Rating Factors

Strength
  • Fairly diversified business operations.
Challenges/Risks
  • Weak liquidity position at holding company level; 
  • Exposure to cross-border risks; and
  • Property and hospitality divisions continue to face challenging conditions.

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