MARC has affirmed its ratings on Putrajaya Holdings Sdn Bhd’s (PJH) issuances under the following programmes:

• 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. 

The ratings affirmation and outlook are premised on the predictable and sizeable rental income from the Malaysian government as the principal lessee of the government buildings in Putrajaya that were constructed by PJH. The buildings are tenanted under several long-term lease-and-sublease agreements between PJH and the government. The rental income is deemed more than sufficient to meet the financial obligations under the rated issuances. 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 major shareholders who are government-linked. 

As at end-December 2019, PJH had delivered 41 government building projects with a total gross built-up area of 42.3 million sq ft, including the 4.8 million sq ft Parcel F development completed in April 2019. As construction of government buildings reached the tail end, PJH has increased its undertaking of commercial and residential property projects. These are mainly in Putrajaya to complement the existing developments including affordable housing projects for civil servants through Perumahan Penjawat Awam Malaysia (PPAM). It has commenced a mixed commercial development, comprising a retail mall, a serviced apartment complex, an event hall, a hotel and a student accommodation block in Precinct 7 and 8 with a combined gross development cost (GDC) of RM864.8 million. This is scheduled to be completed by end-2025. 

MARC views that these projects pose an increased market risk amid weak property market conditions and are a departure from PJH’s mainstay of lease-and-sublease arrangements with the government that provide assured payment streams. Nonetheless, non-government related projects remain modest at this juncture. Total property inventory stood at RM349.0 million as at end-December 2019, of which more than half comprises semi-detached houses priced above RM2.0 million. Overall, the average take-up rate for PJH’s ongoing residential projects is 49% during the period.