Rating action     

MARC Ratings has affirmed its ratings on Putrajaya Holdings Sdn Bhd’s (PJH) programmes as follows:

• RM1.0 billion 20-year Sukuk Wakalah Programme (due 2041) at AAA_IS
• RM370.0 million Sukuk Musharakah Programme (due 2030) at AAA_IS
• RM3.0 billion Sukuk Musharakah Programme (due 2032) at AAA_IS; and
• RM1.5 billion Sukuk Musharakah Medium-Term Notes (MTN) Programme (due 2033) at AAA_IS.

The outlook for all ratings is stable. 

Rationale      

The ratings affirmation is premised on the credit strength of the Malaysian government as the principal lessee of government buildings in Putrajaya under individual long-term lease-and-sublease agreements with PJH. The sizeable rental income stream is deemed sufficient to meet the financial obligations under the rated programmes. PJH’s developmental track record and the credit strength of its government-linked major shareholders underpin the ratings. Aside from government buildings, PJH has undertaken residential and commercial property development mainly in Putrajaya to complement the overall development of the federal administrative capital.  

In 2022, revenue rose 11.0% y-o-y to RM2.1 billion, supported by increased sales of residential properties in Putrajaya. Despite the higher revenue, operating profit reduced slightly to RM1.0 billion in 2022 (2021: RM1.1 billion) due to the higher costs of sales and services. PJH receives lease rental income of RM1.4 billion annually which is more than sufficient to meet principal repayments of between RM470.0 million and RM530.0 million annually over the next five years. Borrowings declined to RM3.4 billion as at end-2022 from about RM4.1 billion in 2021 on repayments under the various programmes. Consequently, debt-to-equity (DE) ratio improved to 0.34x from 0.42x in 2021. 

MARC Ratings views PJH’s commercial and residential property projects pose some concern amid the challenging property market outlook. The rating agency notes that this concern is substantially alleviated by PJH’s core lease receivables activity. The group has deferred most of its project launches for now to focus on clearing its completed inventories.

The stable outlook reflects MARC Ratings’ 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.

A significant reduction in key shareholders’ support or changes to the shareholding structure could prompt downward rating pressures.