CREDIT ANALYSIS REPORT

BERJAYA LAND BERHAD - 2021

Report ID 60538900461 Popularity 76 views 9 downloads 
Report Date Dec 2021 Product  
Company / Issuer Berjaya Land Bhd Sector Property
Price (RM)
Normal: RM500.00        
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Rationale
Rating action     
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) and RM150.0 million MTN Programme guaranteed by OCBC Bank (Malaysia) Berhad (OCBC Malaysia). The ratings of AAA(fg) and AAA(bg) carry a stable outlook. 

Rationale     
The affirmed ratings reflect the unconditional and irrevocable guarantees provided by Danajamin (rated AAA/Stable) and OCBC Malaysia (rated AAA/Stable).

BLand is an intermediate investment holding company with interests in gaming, motors, properties, hotels and recreation. Its standalone credit profile has been weighed down by the impact of the recent closures of business operations in Malaysia due to the pandemic. This is reflected in BLand’s hotels and leisure businesses which have continued to register a combined loss of RM184 million during the financial year ended June 30, 2021 (FY2021). Earnings from its property operations also weakened to RM10.6 million as construction progress was hampered by pandemic-induced restrictions.

BLand’s performance continued to be supported by its key subsidiary Berjaya Sports Toto Berhad (BToto) whose domestic number forecasting operations (NFO) and motor retailing business in the United Kingdom (UK) have somewhat recovered from the impact of the pandemic. Its motor retailing business through H. R. Owen Ltd. is the largest revenue contributor to the group in FY2021. H. R. Owen’s performance was supported by higher sales volume and backlog order fulfilment following the easing of pandemic measures. Motor retailing accounted for 46.2% of group revenue of RM5.4 billion while its gaming operation accounted for 43%.

The group’s domestic property development is largely limited to the Tropika mixed development in Bukit Jalil, with a total gross development value (GDV) of RM852 million. To date, only the apartment towers have been launched, registering a moderate take-up rate of 62%. BLand is expected to launch a high-rise residential project in Shah Alam with an estimated GDV of RM268 million in the near term. Its ongoing overseas project is the Hanoi Garden City mixed development project in Vietnam, where the group is currently constructing 86 units of shophouses (GDV: RM153.5 million) with expected completion in 3Q2022. As at end-June 2021, the project recorded a strong take-up rate of 83%. 

For FY2021, BLand registered pre-tax loss of RM43.9 million in the absence of significant gains from disposal as registered a year earlier. Group borrowings, however, eased to RM3.1 billion (FY2020: RM3.6 billion) as it utilised proceeds from the sale of its stake in the cancelled joint development in Jeju, Korea to pare down some of its term debts. BLand would continue to rely on proceeds from asset disposals and refinancing to address its long-term financial obligations. With the decline in borrowings, despite losses registered during the year, debt-to-equity ratio improved slightly to 0.52x (FY2020: 0.58x). Its liquidity position is supported by cash and bank balances of RM648.4 million as at end-June 2021. 

Ratings outlook     
The stable outlook reflects the guarantees provided by Danajamin and OCBC Malaysia. Noteholders are insulated from BLand's standalone credit profile by the guarantees provided. Any change in the supported ratings or ratings outlook would primarily be driven by changes in the credit strength of the guarantors.

Key strength
Fairly diversified business operations 

Key risks
Weak liquidity position at holding company level
Exposure to cross-border risks
Property and hospitality divisions continue to face challenging conditions 

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