CREDIT ANALYSIS REPORT

TALAM TRANSFORM BERHAD - 2021

Report ID 6053890027 Popularity 683 views 26 downloads 
Report Date Sep 2021 Product  
Company / Issuer Talam Transform Bhd Sector Construction
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Rationale
Rating action     
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 of June 9, 2021. The rating continues to reflect the substantial risk of default on the Settlement BaIDS, notwithstanding the extension of the maturity date of Talam’s Settlement BaIDS by 18 months to June 28, 2022, from December 28, 2020. 

Rationale     
The rating considers Talam's weak business and financial prospects that remain challenged by the tough operating environment. It has relied and will continue to rely substantially on proceeds from disposals of land parcels to meet its financial obligations. Timely execution of asset disposals remains a key risk, particularly given the non-prime locations of most of its remaining landbank.

At end-March 2021, the group’s total land parcels of 746.0 acres have an estimated unencumbered value of about RM317.9 million. The outstanding balance under the Settlement BaIDS of RM40.0 million is partially secured against property units in Taman Puncak Jalil, Bukit Jalil, with an aggregate value of RM9.8 million as at end-March 2021, providing a low security coverage of 0.25x. While Talam would rely on the proceeds from land disposals to repay its borrowings, this is likely to be challenging over the intermediate term in view of the weak property market conditions. 

During the financial year ended March 31, 2021 (FY2021), Talam recorded revenue of RM36.9 million and pre-tax losses of RM30.1 million. The losses were mainly due to impairment provisions of RM34.1 million from investment in its subsidiary in China. Negative cash flow from operations (CFO) widened to RM51.1 million (FY2020: negative RM6.0 million). Its liquidity, as reflected by cash and bank balances of RM3.3 million at end-March 2021, remained weak relative to its financial obligations. 

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