Thursday, Mar 15, 2001
Malaysian Rating Corporation Berhad (MARC) has reaffirmed Setia Putrajaya Sdn Bhd’s (Setia Putrajaya) RM375 million Murabahah Notes Issuance Facility (MuNIF)/Medium Term Notes (MTN) (1998/2001) ratings at MARC-2ID /A+ID. In respect of the RM170 million MuNIF (2000/2003), MARC has also reaffirmed the rating at MARC-2ID
The ratings reaffirmation reflect Setia Putrajaya’s manageable construction risks given its proven ability to complete construction works in a timely manner; the certainty in sales take-up of residential units in Precinct 9 by Putrajaya Holdings Sdn Bhd (Putrajaya Holdings); and its restored profitability. The strong shareholder support of SP Setia Bhd (S P Setia), in terms of resources and expertise, is also recognized. The ratings are further supported by the creation of sinking fund accounts to capture progress payments from Putrajaya Holdings. Offsetting these factors is the small degree of demand risk with respect to the public residential units, and the high debt burden that continues to weigh down the company’s overall financial position.
Setia Putrajaya had been awarded contracts to construct key Government buildings and to develop numerous precincts in Putrajaya of which work is currently ongoing in Precinct 9. Despite its brief operating history, the company has, thus far, displayed its ability in completing its contracts in Putrajaya in a timely manner. The company has since completed the construction of the key Government buildings and over 800 units of residential properties under Phase 1A of Precinct 9. Presently, development work is focused on Phases 1B and 2 of Precinct 9, which mainly comprise of residential properties. The company’s construction effort continues to receive strong support from its shareholder, S P Setia, an established property developer, in terms of resources and expertise.
The en-bloc sale of 93%, 100% and 78% of the residential units in Phases 1A, 1B and 2 respectively to Putrajaya Holdings, to be reserved for the Government’s employees, provide a high degree of certainty in the sales take-up; substantially mitigating both market and credit risks.
As at end-November 2000, Setia Putrajaya had redeemed and cancelled RM287 million face value of the RM375 million MuNIF/MTN facility, thus reducing the facility limit to RM88 million. The corresponding amount in the sinking fund account (SFA) as at 9 December 2000 was RM32 million. The final maturity of the remaining RM88 million, which is due by November 2001, is not expected to pose any major concern. Collectively, the SFA balance and outstanding billings amount to a total of RM181.7 million providing a security coverage of 2.1x.
In respect of the RM170 million facility, the amount in the SFA amounted to RM25.7 million as at 9 December 2000. The total remaining billings as at end-October 2000 stood at RM60.5 million and RM117.6 million for Phase 1B and 2 respectively. Collectively, the SFA balance and outstanding billings provide a security coverage of 1.2x.
Setia Putrajaya’s pre-tax profit dropped slightly to RM6.2 million during the year from RM9.7 million previously following the much lower turnover. Net operating margin nevertheless improved to 3.3% during the year from 1.1% previously. Debt leverage also increased marginally to 4.4x from 3.9x previously mainly as a result of the drawdown of the additional RM170 million MuNIF facility. The proforma debt leverage is projected to improve to 3.1x after the redemption of the balance of the MuNIF/MTN facility by November 2001.
The ratings reaffirmation reflect Setia Putrajaya’s manageable construction risks given its proven ability to complete construction works in a timely manner; the certainty in sales take-up of residential units in Precinct 9 by Putrajaya Holdings Sdn Bhd (Putrajaya Holdings); and its restored profitability. The strong shareholder support of SP Setia Bhd (S P Setia), in terms of resources and expertise, is also recognized. The ratings are further supported by the creation of sinking fund accounts to capture progress payments from Putrajaya Holdings. Offsetting these factors is the small degree of demand risk with respect to the public residential units, and the high debt burden that continues to weigh down the company’s overall financial position.
Setia Putrajaya had been awarded contracts to construct key Government buildings and to develop numerous precincts in Putrajaya of which work is currently ongoing in Precinct 9. Despite its brief operating history, the company has, thus far, displayed its ability in completing its contracts in Putrajaya in a timely manner. The company has since completed the construction of the key Government buildings and over 800 units of residential properties under Phase 1A of Precinct 9. Presently, development work is focused on Phases 1B and 2 of Precinct 9, which mainly comprise of residential properties. The company’s construction effort continues to receive strong support from its shareholder, S P Setia, an established property developer, in terms of resources and expertise.
The en-bloc sale of 93%, 100% and 78% of the residential units in Phases 1A, 1B and 2 respectively to Putrajaya Holdings, to be reserved for the Government’s employees, provide a high degree of certainty in the sales take-up; substantially mitigating both market and credit risks.
As at end-November 2000, Setia Putrajaya had redeemed and cancelled RM287 million face value of the RM375 million MuNIF/MTN facility, thus reducing the facility limit to RM88 million. The corresponding amount in the sinking fund account (SFA) as at 9 December 2000 was RM32 million. The final maturity of the remaining RM88 million, which is due by November 2001, is not expected to pose any major concern. Collectively, the SFA balance and outstanding billings amount to a total of RM181.7 million providing a security coverage of 2.1x.
In respect of the RM170 million facility, the amount in the SFA amounted to RM25.7 million as at 9 December 2000. The total remaining billings as at end-October 2000 stood at RM60.5 million and RM117.6 million for Phase 1B and 2 respectively. Collectively, the SFA balance and outstanding billings provide a security coverage of 1.2x.
Setia Putrajaya’s pre-tax profit dropped slightly to RM6.2 million during the year from RM9.7 million previously following the much lower turnover. Net operating margin nevertheless improved to 3.3% during the year from 1.1% previously. Debt leverage also increased marginally to 4.4x from 3.9x previously mainly as a result of the drawdown of the additional RM170 million MuNIF facility. The proforma debt leverage is projected to improve to 3.1x after the redemption of the balance of the MuNIF/MTN facility by November 2001.