Friday, Feb 04, 2005
MARC has affirmed the ratings of OSK Property Holdings Bhd (OSKP)’s Class A and B BaIDS at AID and A-ID respectively; reflecting OSKP’s strong presence in Sungai Petani, Kedah with its favourable flagship development – Bandar Puteri Jaya (BPJ) and improving financial performance; tempered by its vulnerability to adverse development in the property markets. The enhanced AID rating reflects secured sales receivables identified as repayment source that are accorded to Class A BaIDS.
OSKP, listed on the Main Board of Bursa Malaysia, spearheads the property business of OSK Holdings Berhad, an established player in the local stockbroking industry. BPJ, an integrated garden township, has been well received whereby the maiden Phases 1 and 2 recorded average take-up rates of more than 90%. The newly launched parcel within Phase 3 of BPJ also posted an encouraging take-up rate of 40% within the first month of launching in December 2004.
To broaden its income base, OSKP is involved in other property projects located in Seremban, Sungai Buloh and Kajang. Demand for the Seremban project; Seremban 3; has been commendable against a lacklustre performance in the state’s property market. The Sungai Buloh and Kajang projects are expected to be launched in 2005 where the Kajang project adjacent to Country Heights has been earmarked as OSKP’s foray into the high-end market. In addition, OSKP is also acquiring Ke-Zan Holdings Bhd (KHB); a property investment company owning Plaza OSK and six other office blocks that are mostly occupied by companies within the group; from its holding company subject to the approval from the relevant authorities.
Under the issue structure, sales receivables under BPJ’s project have been identified as the main source of repayment for the BaIDS. As at December 2004, the total sales receivables of BPJ and Seremban 3 totalled RM66.9 million; translating into a security coverage ratio of 1.30 times. While the coverage ratio was marginally lower than the covenanted 1.43 times, it still provides sufficient protection to the Class A bondholders reflected by the more than one-time security coverage ratio. The shortfall in the coverage ratio is attributable to delay in launching Phase 3, which in turn was due to additional works done to fulfil new requirements enforced by the local authorities. MARC takes comfort that the issues had been resolved and expects sales from Phase 3 to support the security coverage going forward. The breaching of the security coverage ratio does not constitute an event of default under the issue structure.
Refinancing risk will be largely mitigated by the serial redemption payment structure of the BaIDS. The maintenance of a six-month liquidity buffer in a debt service reserve account and reserve account respectively will mitigate liquidity risk.
OSKP’s revenue and profit before tax improved substantially aided mainly by the strong sales for BPJ’s properties. FY2003’s financials reflect OSKP’s first full year financial performance as a property developer after the group-wide streamlining exercise completed in August 2002. OSKP’s capital structure has been solid with a debt-equity ratio of 0.42 times as at June 2004. Under the issue structure the debt-equity ratio is capped at 1.25 times.
OSKP, listed on the Main Board of Bursa Malaysia, spearheads the property business of OSK Holdings Berhad, an established player in the local stockbroking industry. BPJ, an integrated garden township, has been well received whereby the maiden Phases 1 and 2 recorded average take-up rates of more than 90%. The newly launched parcel within Phase 3 of BPJ also posted an encouraging take-up rate of 40% within the first month of launching in December 2004.
To broaden its income base, OSKP is involved in other property projects located in Seremban, Sungai Buloh and Kajang. Demand for the Seremban project; Seremban 3; has been commendable against a lacklustre performance in the state’s property market. The Sungai Buloh and Kajang projects are expected to be launched in 2005 where the Kajang project adjacent to Country Heights has been earmarked as OSKP’s foray into the high-end market. In addition, OSKP is also acquiring Ke-Zan Holdings Bhd (KHB); a property investment company owning Plaza OSK and six other office blocks that are mostly occupied by companies within the group; from its holding company subject to the approval from the relevant authorities.
Under the issue structure, sales receivables under BPJ’s project have been identified as the main source of repayment for the BaIDS. As at December 2004, the total sales receivables of BPJ and Seremban 3 totalled RM66.9 million; translating into a security coverage ratio of 1.30 times. While the coverage ratio was marginally lower than the covenanted 1.43 times, it still provides sufficient protection to the Class A bondholders reflected by the more than one-time security coverage ratio. The shortfall in the coverage ratio is attributable to delay in launching Phase 3, which in turn was due to additional works done to fulfil new requirements enforced by the local authorities. MARC takes comfort that the issues had been resolved and expects sales from Phase 3 to support the security coverage going forward. The breaching of the security coverage ratio does not constitute an event of default under the issue structure.
Refinancing risk will be largely mitigated by the serial redemption payment structure of the BaIDS. The maintenance of a six-month liquidity buffer in a debt service reserve account and reserve account respectively will mitigate liquidity risk.
OSKP’s revenue and profit before tax improved substantially aided mainly by the strong sales for BPJ’s properties. FY2003’s financials reflect OSKP’s first full year financial performance as a property developer after the group-wide streamlining exercise completed in August 2002. OSKP’s capital structure has been solid with a debt-equity ratio of 0.42 times as at June 2004. Under the issue structure the debt-equity ratio is capped at 1.25 times.