Tuesday, Apr 06, 2004
MARC has assigned a rating of AID (A flat, Islamic debt) and A-ID (A minus, Islamic debt) to OSK Property Holdings Berhad (OSKP)’s Class A and B Serial Bai-Bithaman Ajil Islamic bonds (BaIDS) respectively. The A-ID rating assigned to Class B BaIDS reflects OSKP’s favourable flagship development – Bandar Puteri Jaya (BPJ) located in Sungai Petani, Kedah and its strong presence in that area; tempered by its vulnerability to adverse developments in the property markets. The enhanced AID rating assigned to the Class A BaIDS reflects the secured sales receivables identified as repayment source with a security cover of 1.43 times.
OSKP, listed on the Main Board of Malaysia Securities Exchange Berhad (MSEB), is the property arm of OSK Holdings Berhad, an established player in the local stockbroking industry. OSKP flagship development - BPJ, developed as an integrated garden township, has been well received by recording an average take-up rate of 85.2% for its launched phases. Besides BPJ, OSKP is also involved in other property developments, namely Seremban 3 and a new project situated at Mukim of Sungai Buloh through joint-ventures.
Under the issue structure, sales receivables for launched phases of BPJ together with future progress billings from six parcels of lands within Phase 3 of BPJ have been identified as the main source of repayment of the BaIDS. As at November 2003, the total sales receivables of BPJ totalled RM72.8 million whilst the cumulative gross development value of the identified phases under phase 3 is approximately RM793.50 million. Phase 3 of BPJ, to be progressively launched from January 2004 onwards, is expected to achieve good take-up rates judging from the strong historical records, attractive pricing, good location within Sungai Petani and its development mix. As a condition under the issue structure, total receivables from the secured sales under the assigned phases must be at least 1.43 times of the Class A BaIDS outstanding. Any remaining receivables will be used towards servicing the Class B BaIDS. However, should there be a shortfall in the remaining billings from the assigned phases, OSKP shall utilize remaining billings from its other property developments to meet the said security coverage ratio of Class A BaIDS. Other than the BPJ development, OSKP is anticipated to reap benefits from its joint ventures in Seremban 3 and up-coming Sungai Buloh developments going forward; providing additional revenue source to the group.
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. MARC’s sensitivity analysis on the projected financials of OSKP reveals a resilient cash flow position under various assumptions of delays and discounts in progress billings.
Other than improved profitability, OSKP’s capital structure has been solid. Upon issuance of the RM100 million BaIDS, OSKP’s pro-forma debt-equity ratio will touch 0.64 times. Under the issue structure the debt-equity ratio is capped at 1.25 times.
OSKP, listed on the Main Board of Malaysia Securities Exchange Berhad (MSEB), is the property arm of OSK Holdings Berhad, an established player in the local stockbroking industry. OSKP flagship development - BPJ, developed as an integrated garden township, has been well received by recording an average take-up rate of 85.2% for its launched phases. Besides BPJ, OSKP is also involved in other property developments, namely Seremban 3 and a new project situated at Mukim of Sungai Buloh through joint-ventures.
Under the issue structure, sales receivables for launched phases of BPJ together with future progress billings from six parcels of lands within Phase 3 of BPJ have been identified as the main source of repayment of the BaIDS. As at November 2003, the total sales receivables of BPJ totalled RM72.8 million whilst the cumulative gross development value of the identified phases under phase 3 is approximately RM793.50 million. Phase 3 of BPJ, to be progressively launched from January 2004 onwards, is expected to achieve good take-up rates judging from the strong historical records, attractive pricing, good location within Sungai Petani and its development mix. As a condition under the issue structure, total receivables from the secured sales under the assigned phases must be at least 1.43 times of the Class A BaIDS outstanding. Any remaining receivables will be used towards servicing the Class B BaIDS. However, should there be a shortfall in the remaining billings from the assigned phases, OSKP shall utilize remaining billings from its other property developments to meet the said security coverage ratio of Class A BaIDS. Other than the BPJ development, OSKP is anticipated to reap benefits from its joint ventures in Seremban 3 and up-coming Sungai Buloh developments going forward; providing additional revenue source to the group.
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. MARC’s sensitivity analysis on the projected financials of OSKP reveals a resilient cash flow position under various assumptions of delays and discounts in progress billings.
Other than improved profitability, OSKP’s capital structure has been solid. Upon issuance of the RM100 million BaIDS, OSKP’s pro-forma debt-equity ratio will touch 0.64 times. Under the issue structure the debt-equity ratio is capped at 1.25 times.