CENTRAL IMPRESSION SDN BHD - 2022 |
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| Report ID | 6053890046867 | Popularity | 426 views 19 downloads | |||||
| Report Date | Aug 2022 | Product | ||||||
| Company / Issuer | Central Impression Sdn Bhd | Sector | Property | |||||
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| Rationale |
Rating action MARC Ratings has affirmed its AA- rating on Central Impression Sdn Bhd’s (CISB) outstanding RM60 million Fixed Rate Serial Bonds. The rating outlook has been revised to stable from negative. Rationale The affirmed rating is driven by the credit strength of AEON Co (M) Berhad (AEON), a 51.7%-owned subsidiary of Japan-based AEON Co Ltd (AEON Japan) which has an established track record in the domestic retail industry. It currently operates 34 departmental stores, 28 of which are in its self-managed malls. AEON is leasing CISB’s AEON Klebang shopping mall under a 10-year lease expiring in October 2025 with an option to extend for another five years. Under the lease agreement, the fixed lease payment arrangement eliminates CISB’s exposure to occupancy risk as well as sublease termination and sublease credit risks. The revised outlook is premised on the easing of concerns on CISB’s ability to resolve its tax obligations. In addition to CISB’s shareholders’ irrevocable commitment to provide financial support for the tax payments, the rating agency notes that part of the proceeds from a new share issuance was utilised to partially repay the tax arrears, the balance of which will be addressed through an installment arrangement with the tax authority as has been done in the past. In terms of lease payments, CISB has continued to receive RM18.3 million p.a. As at end-June 2022, the balance in its designated accounts of RM20.4 million is sufficient to meet its upcoming financial obligation of RM16.5 million in November 2022. Based on the unaudited financial statement for FY2022, CISB’s debt service cover ratio (DSCR) of 2.0x remained above the covenanted DSCR of 1.5x. MARC Ratings takes comfort from the restriction of distributions by CISB to its shareholders if the post-distribution DSCR falls below 1.75x. Sycal Berhad, the main contractor of the AEON Klebang development, has provided a corporate guarantee to AEON to undertake refurbishments in 2020 and 2025. To date, AEON has not made any request for refurbishment works. The bondholders have the first legal charge on AEON Klebang, which is valued at an estimated RM300 million against outstanding bonds of RM60 million as at June 30, 2022. Rating outlook The stable outlook reflects our expectation that CISB will continue to receive lease payments from AEON as well as financial support from the shareholders, to ensure the company’s cash flow remains supportive of meeting its financial obligations (including covenanted minimum DSCR of 1.5x under the structure). Rating trajectory Upside scenario No upside to the rating is envisaged in the near term. Downside scenario The rating would be lowered if the shareholders fail to provide timely financial support to the company for its tax obligations when required, which could lead to tax payments being made from the designated accounts and hence, a potential breach of CISB’s covenanted DSCR. Key strength
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