TITIJAYA LAND BERHAD - 2021 |
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| Report ID | 60538900426 | Popularity | 723 views 22 downloads | |||||
| Report Date | Dec 2021 | Product | ||||||
| Company / Issuer | Titijaya Land Bhd | Sector | Property | |||||
| Price (RM) |
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| Rationale |
Rating action MARC has affirmed its rating of MARC-2IS on Titijaya Land Berhad’s (Titijaya) RM150 million Islamic Commercial Papers (ICP) Programme. The outstanding notes under the programme stood at RM70.0 million as at end-September 2021. Rationale The rating incorporates Titijaya’s track record in developing projects in and around mature housing areas, and its moderate leverage and liquidity positions. Key moderating factors are the challenging outlook for the domestic property market that has weighed on Titijaya’s take-up rate and its higher inventory level. The group has several ongoing developments, mainly in the Klang Valley and Sabah, with a combined gross development value (GDV) of RM1.6 billion as at end-June 2021. Titijaya has continued to defer property launches to FY2022 amid the soft property market, compounded by the COVID-19 pandemic. Its most recent residential development, Damaisuria (phase 1a) (GDV: RM214.1 million) was launched in July 2019. The deferments have eased concerns on the requirement for further working capital and provided headroom to better manage cash flows. The group’s overall take-up rate improved to 53.0% at end-June 2021 compared to 47.3% at end-March 2020. However, we note that response to its two ongoing serviced apartments, the Damaisuria development and The Shore in Kota Kinabalu, has remained weak at 19.7% and 48.2%. Office developments at 3rdNvenue and Riveria City in Kuala Lumpur, which accounted for 60% of GDV, have achieved moderate take-up rates of 55.7% and 68.8%. Titijaya’s property inventory increased by 6.9% y-o-y to RM211.4 million as at end-June 2021 (end-June 2020: RM197.8 million) following the completion of a linked villa development, Park Residency (GDV: RM89.4 million) at Alam Damai, Cheras; currently 45 units remain unsold. Given its moderate take-up rate, completed inventory level could rise in the near term. We understand that the group is also focusing on reducing its inventory. This has been evident by recent clearance of inventories amounting to RM44.6 million since mid-July 2021, including the 3 Elements mall in Seri Kembangan and 55 units at the H2O development in Ara Damansara. In FY2021, Titijaya recorded 53.4% y-o-y higher revenue, mainly driven by progress billings on its ongoing projects under the relaxed movement restrictions. However, operating profit margin declined to 8.5% (FY2020: 12.5%) due to a RM20.1 million impairment on its joint venture development, Odeon (along Jalan Tuanku Abdul Rahman). Excluding the impairment, operating profit margin would stand at about 16%. Its debt-to-equity (DE) ratio remained moderate at 0.44x at end-June 2021. Titijaya’s available landbank of 127.5 acres, mostly in prime locations, would be supportive of development potential and is a source of additional liquidity. Unbilled sales of RM337.0 million as at end-June 2021 should be adequate to fund next year’s working capital requirement estimated at RM301.5 million. Titijaya’s near-term obligations as at end-FY2021 comprise RM70.0 million of the outstanding ICPs which are expected to be rolled over, while RM44.2 million settlement of revolving credit and the remaining RM64.8 million can be met via cash balance of RM173.1 million. Undrawn project lines of about RM481 million provide a source of additional liquidity. Rating trajectory Upside scenario Any upgrade would consider sustained improvement in profitability, guided by sharp improvement in liquidity and cash flow metrics. Downside scenario The rating could come under pressure if performance were to deteriorate from expectations and/or if liquidity were to decline sharply. Key strengths • Focus on mature housing areas mitigates demand risk • Moderate debt level Key risks • Reducing inventory level • Managing liquidity position • Challenging outlook for the property market |
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