CREDIT ANALYSIS REPORT

SUNSURIA BERHAD - 2022

Report ID 6053890046916 Popularity 120 views 10 downloads 
Report Date Oct 2022 Product  
Company / Issuer Sunsuria Bhd Sector Property
Price (RM)
Normal: RM500.00        
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Rationale
Rating action     
MARC Ratings has affirmed its rating of A+IS on Sunsuria Berhad’s RM500.0 million Sukuk Wakalah Programme. The rating outlook is stable.      

Rationale     
The rating affirmation incorporates Sunsuria’s development approach through joint ventures, its low net leverage and strong liquidity position. The rating also factors in the prevailing challenging domestic property market outlook that has weighed on demand, and the impact of a rising cost environment on operating margins.

Total ongoing gross development value (GDV) stood at RM1.9 billion as at end-March 2022, of which about 10% is within the 375-acre Sunsuria City township in Salak Tinggi, Selangor. This flagship township development, scheduled for completion by end-2032, will provide continued development opportunities anchored around its catalyst development, Xiamen University Malaysia. Sunsuria’s other ongoing developments comprise the Forum II project in Setia Alam, Selangor and the Bangsar Hillpark project in Bangsar, Kuala Lumpur. Its ongoing projects recorded a moderate overall take-up rate of 59.2% as at end-March 2022. Against weakening demand, inventory level rose to RM113.2 million as at end-March 2022 from RM43.7 million a year prior.

MARC Ratings continues to view the group’s joint-venture approach to property development, which reduces initial capital outlay, and its ability to manage development construction internally as key factors that have contributed to healthy property margins despite some weakening in recent periods. Operating profit margin declined to 16% from above 20%.

For the six months ended March 2022 (1HFY2022), revenue rose by about 62% y-o-y to RM179.8 million following the easing of operational restrictions and resumption of economic activities. Cash flow from operations (CFO) of RM122.9 million was mostly supported by sales of completed units at its Sunsuria City township. Its unbilled sales of RM643.2 million provide earnings visibility through 2024.

Group borrowings declined to RM497.4 million as at end-March 2022 (end-FY2021: RM530.0 million). Leverage has remained low with net debt-to-equity (DE) ratio standing at 0.18x with strong cash balance of RM310.2 million. Coupled with unutilised credit facilities of RM205.1 million, its liquidity position provides funding source to support its construction requirements over the near term.

Rating outlook     
The stable outlook reflects MARC Ratings’ expectation that Sunsuria’s credit profile will remain broadly in line with the rating band over the next 12-18 months.

Rating trajectory     

Upside scenario     
We do not consider any upward movement in the group’s rating over the next 12 months. Over the medium term, any upgrade would be premised on the growth in its ongoing developments while maintaining strong performance and debt metrics.

Downside scenario     
Downward rating pressure would occur if financial performance were to deteriorate to an extent that there is larger-than-expected inventory build-up and/or if borrowings were to substantially increase from expectations.

Key strengths
  • Balanced approach to property development
  • Low leverage position
Key risks
  • Potential increase in inventory level
  • Challenging domestic property market outlook





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