Monday, Oct 07, 2002
Malaysian Rating Corporation Berhad (MARC) has reaffirmed Syarikat Perumahan Negara Berhad’s (SPN) RM1 billion 3% Fixed Rate Bonds (1998/2003) at AAA(s).
The reaffirmation of the rating is primarily based on the external enhancement or support in the form of a ‘put option’, provided irrevocably and unconditionally by Petroliam Nasional Bhd (PETRONAS) to the bondholders. The option requires PETRONAS to purchase the fixed rate bonds at face value together with the accrued interest thereon, upon the occurrence of an event of default. The rating also reflects PETRONAS’ robust cash flow generation supported by a favourable production profile, strong profitability measures, sound capital structure, significant role in the Malaysian economy and full ownership by the federal government.
Wholly owned by the Minister of Finance Inc., SPN was established solely for the purpose of promoting the development of low cost housing in the country. SPN essentially develops or purchases low cost houses, which will then be sold to eligible buyers. Todate, SPN’s projects total RM2.9 billion, of which RM1.2 billion represents low cost housing projects in various states; expected to be fully completed and delivered to house buyers with Certificate of Fitness (CF) by 2004; RM1.5 billion for the construction of 6,963 units of army quarters; and RM300 million for the rehabilitation of abandoned housing projects.
MARC believes the provision of adequate and affordable housing for the low-income group will be of primary concern to the federal government. Low cost housing shortage is most acute in urban areas where demand is the highest but land is scarce and expensive. The increase in the price ceiling from RM25,000 to RM42,000 is expected to spur the development of these houses set against the gradual recovery in the residential property subsector.
In fiscal year December 2001, SPN registered an operating income of approximately RM81.5 million, as compared to RM36.5 million in the previous year. Fiscal year 2001 witnessed for the first time the inclusion of revenue from proceeds of property development activities amounting to RM40.1 million, which constituted almost half of the operating income for the year. As with the previous years, interest income continued to be a major contributor to SPN’s operating income, adding almost RM41.4 million in fiscal year 2001 (FY2000: RM36.5 million). Moving forward, SPN’s source of income will primarily be the sales proceeds from the property development of mainly low cost housing.
Refinancing risk associated with the bullet payment structure of the bonds is eliminated by the put option granted by PETRONAS to the bondholders. The presence of PETRONAS as the major sponsor and the Minister of Finance Inc. as the sole shareholder afford SPN with a high degree of financial flexibility. The federal government’s continued support to the company is assured given its strategic role in the provision of social housing.
The reaffirmation of the rating is primarily based on the external enhancement or support in the form of a ‘put option’, provided irrevocably and unconditionally by Petroliam Nasional Bhd (PETRONAS) to the bondholders. The option requires PETRONAS to purchase the fixed rate bonds at face value together with the accrued interest thereon, upon the occurrence of an event of default. The rating also reflects PETRONAS’ robust cash flow generation supported by a favourable production profile, strong profitability measures, sound capital structure, significant role in the Malaysian economy and full ownership by the federal government.
Wholly owned by the Minister of Finance Inc., SPN was established solely for the purpose of promoting the development of low cost housing in the country. SPN essentially develops or purchases low cost houses, which will then be sold to eligible buyers. Todate, SPN’s projects total RM2.9 billion, of which RM1.2 billion represents low cost housing projects in various states; expected to be fully completed and delivered to house buyers with Certificate of Fitness (CF) by 2004; RM1.5 billion for the construction of 6,963 units of army quarters; and RM300 million for the rehabilitation of abandoned housing projects.
MARC believes the provision of adequate and affordable housing for the low-income group will be of primary concern to the federal government. Low cost housing shortage is most acute in urban areas where demand is the highest but land is scarce and expensive. The increase in the price ceiling from RM25,000 to RM42,000 is expected to spur the development of these houses set against the gradual recovery in the residential property subsector.
In fiscal year December 2001, SPN registered an operating income of approximately RM81.5 million, as compared to RM36.5 million in the previous year. Fiscal year 2001 witnessed for the first time the inclusion of revenue from proceeds of property development activities amounting to RM40.1 million, which constituted almost half of the operating income for the year. As with the previous years, interest income continued to be a major contributor to SPN’s operating income, adding almost RM41.4 million in fiscal year 2001 (FY2000: RM36.5 million). Moving forward, SPN’s source of income will primarily be the sales proceeds from the property development of mainly low cost housing.
Refinancing risk associated with the bullet payment structure of the bonds is eliminated by the put option granted by PETRONAS to the bondholders. The presence of PETRONAS as the major sponsor and the Minister of Finance Inc. as the sole shareholder afford SPN with a high degree of financial flexibility. The federal government’s continued support to the company is assured given its strategic role in the provision of social housing.