MARC has reaffirmed the short and long-term ratings of Mines Resort Berhad’s (MRB) Bank Guaranteed Commercial Papers and Bank Guaranteed Serial Bonds at MARC-1(bg) and AAA(bg) respectively, reflecting the unconditional and irrevocable guarantee provided by Malayan Banking Berhad (Maybank). On a stand alone basis, MARC maintains a cautious outlook for MRB, reflecting delays in its proposed property launches and increased uncertainty in respect of future take-up rates. Nonetheless, MRB registered better results year on year due to higher revenues from its completed Heritage Towers development.

MRB is principally a property development company, currently developing a project named “South of the Mines” (South Lake Project), an upmarket mixed development predominantly residential and covering 211 acres in the vicinity of Jalan Sungai Besi, to complement the existing Mines Resort City also known as the North Lake. The South Lake Project is expected to exploit the retail and recreational potential of the Mines Resort City. Total GDV of the South Lake Project is estimated at RM1.37 billion and will form the source of repayment for the Bonds and Commercial Papers programme.

The South Lake project comprises several residential and commercial developments, out of which as at todate, The Lake Homes and The Heritage have been launched. The Sepanyol and the Amphitheatre are expected to be launched at the end of FY2007. 

FY2006’s revenue was mainly underpinned by sales from The Heritage project. As at August 2006, cumulative sales under The Heritage and The Lake Homes was RM117.2 million and RM66.6 million respectively. In contrast to FY2005, the operating profit margin for FY2006 improved to 53.58% due to higher recognition of revenue from these property launches.

The debt leverage position of 2.65x as at February 2006 was still within the covenanted level of 9.0x under the issue structure. The DSCR of 2.76x as at February 2006 also complied with the covenanted level of at least 1.5x.

Moving forward, revenue will continue to be driven by ‘The Heritage’ followed by ‘The Lake Homes’; in addition to the expected launches of the remaining residential and commercial projects under the South Lake development. On the other hand, negative rating pressure would emerge if the local property markets experiences further deterioration. MRB’s decision to defer selective projected launches would also further weaken the company’s cash flows in the medium term. Notwithstanding the above, however, sums sitting in the redemption account are sufficient to meet principal repayments due in June 2007.