Friday, May 17, 2002
Malaysian Rating Corporation Berhad (MARC) has reaffirmed Setia Putrajaya Sdn Bhd’s (Setia Putrajaya) rating of MARC-2ID for its RM170 million Murabahah Notes Issuance Facility.
The rating reaffirmation reflects Setia Putrajaya Sdn Bhd’s (Setia Putrajaya) manageable construction risk given its ability to complete its construction works in a timely manner; the en-bloc sale of the bulk of residential units in Precinct 9 to Putrajaya Holdings Sdn Bhd (Putrajaya Holdings); strong shareholder support afforded by SP Setia Bhd (SP Setia) in terms of resources and expertise; the sinking fund mechanism created to capture progress payments from Putrajaya Holdings and Setia Putrajaya’s improved financial performance. The ratings are, however, moderated by the high gearing that continues to weigh down the company’s overall financial position.
Setia Putrajaya currently holds the construction contracts in respect of two key government buildings and the residential and commercial properties under Precinct 9. The construction of the government buildings was part financed by the RM375 million Murabahah Notes Issuance Facility/Medium Term Notes (MuNIF/MTN) programme (1998 – 2001) whilst the developments of Phase 1B and 2 of Precinct 9 are currently supported by the RM170 million MuNIF (2000-2003).
Since the last review, development work has been progressing as planned and todate, Phase 1 and almost all packages of Phase 2 have been completed. The remaining packages under Phase 2 are expected to be launched within the second quarter of 2002. Setia Putrajaya is now focusing on Phase 3 of Precinct 9, which will be developed over the next three to four years with an estimated total sales value of RM520 million.
Progress payments made by Putrajaya Holdings have been specifically earmarked under the issue structure as the source of funds for the redemption of the Islamic facilities. In November 2001, Setia Putrajaya had redeemed and cancelled the RM375 million MuNIF/MTN facility. In respect of the RM170 million MuNIF facility, the company had, as at 31 March 2002, redeemed and cancelled RM90 million at face value. The balance in the corresponding sinking fund account as at 31 March 2002 was RM65.9 million, whilst total remaining billings amounted to RM29.1 million. With the outstanding amount of RM80 million, the security coverage for the MuNIF is currently 1.2 times.
In FY2001, Setia Putrajaya’s revenue increased by 24% to RM176 million from RM141 million previously. Profit margin however, slid downwards to 10.4% on account of larger increase in operating cost. Cash flow performance however, improved as reflected by the significant increase in the interest coverage ratio to 4.95 times from negative 1.5 times previously. Setia Putrajaya’s debt leverage improved to 3.1 times in FY2001 (FY2000 : 4.7 times), in response to the progressive redemption and cancellation of the company’s two Islamic facilities. Following the full redemption of the balance of the RM375 million MuNIF in November 2001 and progressive redemption of the RM170 million MuNIF maturing in January 2003, the company’s leverage is expected to improve further in FY2002.
The rating reaffirmation reflects Setia Putrajaya Sdn Bhd’s (Setia Putrajaya) manageable construction risk given its ability to complete its construction works in a timely manner; the en-bloc sale of the bulk of residential units in Precinct 9 to Putrajaya Holdings Sdn Bhd (Putrajaya Holdings); strong shareholder support afforded by SP Setia Bhd (SP Setia) in terms of resources and expertise; the sinking fund mechanism created to capture progress payments from Putrajaya Holdings and Setia Putrajaya’s improved financial performance. The ratings are, however, moderated by the high gearing that continues to weigh down the company’s overall financial position.
Setia Putrajaya currently holds the construction contracts in respect of two key government buildings and the residential and commercial properties under Precinct 9. The construction of the government buildings was part financed by the RM375 million Murabahah Notes Issuance Facility/Medium Term Notes (MuNIF/MTN) programme (1998 – 2001) whilst the developments of Phase 1B and 2 of Precinct 9 are currently supported by the RM170 million MuNIF (2000-2003).
Since the last review, development work has been progressing as planned and todate, Phase 1 and almost all packages of Phase 2 have been completed. The remaining packages under Phase 2 are expected to be launched within the second quarter of 2002. Setia Putrajaya is now focusing on Phase 3 of Precinct 9, which will be developed over the next three to four years with an estimated total sales value of RM520 million.
Progress payments made by Putrajaya Holdings have been specifically earmarked under the issue structure as the source of funds for the redemption of the Islamic facilities. In November 2001, Setia Putrajaya had redeemed and cancelled the RM375 million MuNIF/MTN facility. In respect of the RM170 million MuNIF facility, the company had, as at 31 March 2002, redeemed and cancelled RM90 million at face value. The balance in the corresponding sinking fund account as at 31 March 2002 was RM65.9 million, whilst total remaining billings amounted to RM29.1 million. With the outstanding amount of RM80 million, the security coverage for the MuNIF is currently 1.2 times.
In FY2001, Setia Putrajaya’s revenue increased by 24% to RM176 million from RM141 million previously. Profit margin however, slid downwards to 10.4% on account of larger increase in operating cost. Cash flow performance however, improved as reflected by the significant increase in the interest coverage ratio to 4.95 times from negative 1.5 times previously. Setia Putrajaya’s debt leverage improved to 3.1 times in FY2001 (FY2000 : 4.7 times), in response to the progressive redemption and cancellation of the company’s two Islamic facilities. Following the full redemption of the balance of the RM375 million MuNIF in November 2001 and progressive redemption of the RM170 million MuNIF maturing in January 2003, the company’s leverage is expected to improve further in FY2002.