CREDIT ANALYSIS REPORT

PUTRAJAYA HOLDINGS SDN BHD - 2022

Report ID 6053890046862 Popularity 556 views 103 downloads 
Report Date Aug 2022 Product  
Company / Issuer Putrajaya Holdings Sdn Bhd Sector Property
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Rationale
Rating action     
MARC Ratings has affirmed its ratings on Putrajaya Holdings Sdn Bhd’s (PJH) issuances under the following programmes:

  • RM1.0 billion 20-year Sukuk Wakalah Programme (due 2041) at AAAIS;
  • RM370.0 million Sukuk Musharakah Programme (due 2030) at AAAIS;
  • RM3.0 billion Sukuk Musharakah Programme (due 2032) at AAAIS; and
  • RM1.5 billion Sukuk Musharakah Medium-Term Notes (MTN) Programme (due 2033) at AAAIS.
The outlook for all ratings is stable. 

Rationale     
The ratings affirmation is premised on the sizeable and predictable rental income from the Malaysian government as the principal lessee of government buildings in Putrajaya. The buildings are tenanted under individual long-term lease-and-sublease agreements between PJH and the government. The rental income stream is deemed sufficient to meet the financial obligations under the rated programmes. The ratings also incorporate PJH’s developmental track record as the master developer of the federal administrative centre in Putrajaya and the credit strength of its government-linked major shareholders. 

In 1Q2022, PJH recorded revenue and pre-tax profit of RM455.8 million and RM219.2 million (2021: RM1.9 billion; RM872.6 million). It receives an annual lease rental income of RM1.4 billion which is more than sufficient to meet principal repayments of between RM470.0 million and RM835.0 million annually over the next five years. With continued repayments, borrowings are trending down, standing at about RM4.1 billion at end-2021 from about RM5.1 billion in the previous year. Consequently, debt-to-equity (DE) ratio has improved to 0.42x from 0.55x.

We also note that as the development of government buildings has reached its tail end, PJH has increased its undertaking of commercial and residential property projects, mainly in Putrajaya. While its involvement in private development projects poses some concern amid a weak property market and moderate take-up rate for its residential units, we note that its exposure remains small relative to its core lease receivables activity. The group has deferred most of its commercial project launches for now to focus on clearing its completed inventories.

Rating outlook     
The stable outlook reflects MARC’s expectations that PJH’s credit profile would remain commensurate with the ratings and that there would be no major changes in PJH’s corporate structure. 

Rating trajectory

Downside scenario     
A significant reduction in key shareholders’ support or changes to the shareholding structure could prompt a reassessment of the ratings. 

Key strengths
  • Steady and sizeable sublease rental income from the Malaysian government 
  • High likelihood of support from government-linked shareholders
Key risks
  • Exposure to market risk from undertaking private development projects 
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