Tuesday, Jan 21, 2003
Malaysian Rating Corporation Berhad (MARC) has affirmed the Islamic debt ratings of MARC-1ID/AAAID (Islamic Debt) to Putrajaya Holdings Sdn Bhd’s (‘PJH’) RM300 million Murabahah Commercial Papers (CP)/Medium-Term Notes (MTN) Programme (2001/2004).
PJH’s ratings reflect its solid capitalization supported by a superior set of shareholders; exceptionally strong financial flexibility; importance of the company in the development of Putrajaya; and an issue structure secured by the specific assignment of the Government’s obligation to make progress payments in respect of the construction of Government quarters (GQs) that will form the primary source of redemption of the CP/MTN issue.
As the concessionaire and developer of the new Federal Government Administrative Centre at Putrajaya, PJH is responsible for the formulation, planning and implementation of the development activities in Putrajaya. This include the construction of infrastructure, Government office buildings, Government quarters and certain amenities. The present Islamic issue is backed by proceeds receivable from the Government in respect of the construction of the GQs.
The construction of GQs by PJH is covered under a Design and Build Agreement (DA) signed on 15 August 2000 with the Government. At a total contract sum of RM1,059 million, the number of GQs to be built in five different precincts is 5,792 units. Development of each precinct has been assigned to a specific contractor; four of which are wholly owned subsidiaries of PJH. Construction works commenced in 1997 and is scheduled for completion in year 2002. As at 11 October 2002, an aggregate 4,238 units of GQs (representing 73% of total contracted GQs) had been delivered to the Government with another 576 units at the Certificate of Practical Completion Stage. MARC believes that construction risk is significantly mitigated, as more than two thirds of the contracted GQs have already been delivered to the Government.
Liquidity risk arising from the timing difference between the monthly payments made to contractors and receipt of progress proceeds from the Government, is covered through the issuance of the CPs with various maturities. The issue specific projected cash flow, based entirely upon the progress payments to be received from the Government in respect of the GQs, exhibits adequate capacity to meet the obligations under this Islamic notes facility.
Progress billings from the sale of development properties and rentals from sub-lease of buildings continued to drive PJH’s revenue in FY2002, making up almost 97% of the RM568.77 million revenue (FY2001: RM580.37 million). Despite a marginal 2% drop in revenue in fiscal year 2002, operating profit margin more than doubled to 27.7% compared to 10.6% in FY2001, attributed by a 28.6% reduction in operating costs. However, a 40.2% increase in interest expense to RM128.26 million (FY2001: RM91.49 million) coupled with a 70.7% reduction in interest income to RM21.40 million (FY2001: RM72.99 million), resulted in a less than one percent growth in PJH’s pre-tax profit to RM67.37 million in FY2002 (FY2001: RM66.85 million). The increase in interest expense was due to the enlarged borrowing base of RM3.14 billion as compared to RM1.72 billion previously, out of which, RM2.25 billion (FY2001: RM1.38 billion) were the outstanding long term Al-Bai Bithaman Ajil (ABBA) serial bonds issues. PJH’s debt leverage is expected to hover around 1.95x in the current financial year (excluding interests) after the recent issuance of RM240 million under a CP/MTN programme of up to RM910 million and the proposed RM1.14 billion ABBA serial bonds issue. The ratio is still manageable and below the cap of 4.0x imposed under the issue structure.
PJH’s exceptionally strong financial flexibility is drawn from the strength of its shareholders, namely, PETRONAS, the national oil and gas company; and Khazanah Nasional Bhd, the investment holding company of the Government.
PJH’s ratings reflect its solid capitalization supported by a superior set of shareholders; exceptionally strong financial flexibility; importance of the company in the development of Putrajaya; and an issue structure secured by the specific assignment of the Government’s obligation to make progress payments in respect of the construction of Government quarters (GQs) that will form the primary source of redemption of the CP/MTN issue.
As the concessionaire and developer of the new Federal Government Administrative Centre at Putrajaya, PJH is responsible for the formulation, planning and implementation of the development activities in Putrajaya. This include the construction of infrastructure, Government office buildings, Government quarters and certain amenities. The present Islamic issue is backed by proceeds receivable from the Government in respect of the construction of the GQs.
The construction of GQs by PJH is covered under a Design and Build Agreement (DA) signed on 15 August 2000 with the Government. At a total contract sum of RM1,059 million, the number of GQs to be built in five different precincts is 5,792 units. Development of each precinct has been assigned to a specific contractor; four of which are wholly owned subsidiaries of PJH. Construction works commenced in 1997 and is scheduled for completion in year 2002. As at 11 October 2002, an aggregate 4,238 units of GQs (representing 73% of total contracted GQs) had been delivered to the Government with another 576 units at the Certificate of Practical Completion Stage. MARC believes that construction risk is significantly mitigated, as more than two thirds of the contracted GQs have already been delivered to the Government.
Liquidity risk arising from the timing difference between the monthly payments made to contractors and receipt of progress proceeds from the Government, is covered through the issuance of the CPs with various maturities. The issue specific projected cash flow, based entirely upon the progress payments to be received from the Government in respect of the GQs, exhibits adequate capacity to meet the obligations under this Islamic notes facility.
Progress billings from the sale of development properties and rentals from sub-lease of buildings continued to drive PJH’s revenue in FY2002, making up almost 97% of the RM568.77 million revenue (FY2001: RM580.37 million). Despite a marginal 2% drop in revenue in fiscal year 2002, operating profit margin more than doubled to 27.7% compared to 10.6% in FY2001, attributed by a 28.6% reduction in operating costs. However, a 40.2% increase in interest expense to RM128.26 million (FY2001: RM91.49 million) coupled with a 70.7% reduction in interest income to RM21.40 million (FY2001: RM72.99 million), resulted in a less than one percent growth in PJH’s pre-tax profit to RM67.37 million in FY2002 (FY2001: RM66.85 million). The increase in interest expense was due to the enlarged borrowing base of RM3.14 billion as compared to RM1.72 billion previously, out of which, RM2.25 billion (FY2001: RM1.38 billion) were the outstanding long term Al-Bai Bithaman Ajil (ABBA) serial bonds issues. PJH’s debt leverage is expected to hover around 1.95x in the current financial year (excluding interests) after the recent issuance of RM240 million under a CP/MTN programme of up to RM910 million and the proposed RM1.14 billion ABBA serial bonds issue. The ratio is still manageable and below the cap of 4.0x imposed under the issue structure.
PJH’s exceptionally strong financial flexibility is drawn from the strength of its shareholders, namely, PETRONAS, the national oil and gas company; and Khazanah Nasional Bhd, the investment holding company of the Government.