MARC Ratings has upgraded Titijaya Land Berhad’s (Titijaya) RM150 million Islamic Commercial Papers (ICP) Programme short-term rating to MARC-1_IS from MARC-2_IS. 

The upgrade reflects Titijaya’s stronger long-term credit profile, with improved business profile and healthier balance sheet, characterised by lower leverage and higher liquidity. Key factors moderating the rating are the challenging property market conditions and execution risk with regard to its new businesses. 

Titijaya has continued to focus on developing projects in and around matured areas that has afforded moderate-to-strong take-up rates. Market response to its ongoing projects has been good, evident in the improved average take-up rate of 79.7% (FY2022: 60.2%). The ongoing projects have a gross development value (GDV) of RM1.0 billion as of end-June 2023; the serviced apartment and small office home office (SoHo) projects — The Shore in Kota Kinabalu and Riveria City (Phase 1) in Brickfields — make up around three-quarters of the GDV. For FY2024, the company has six future projects with an estimated GDV of RM1.1 billion within its existing developments in the Klang Valley; however, their launch dates would depend on market conditions. The rating agency observes that while landbank (excluding land owned by joint-venture partners) is moderate at about 85.3 acres, most are well situated in matured areas. Titijaya’s strategically located landbank offers strong development potential for both residential and commercial projects, providing opportunities for sustainable growth.  

MARC Ratings views positively Titijaya’s transition to greater recurring rental-based revenue while expanding its earnings base through new business ventures. Among these is a logistics facility on a 6.6-acre plot in Bayan Lepas Waterfront, Pulau Pinang, that will be leased to an international logistics group on a long-term basis. The RM200 million project is expected to be completed by end-2023; Titijaya expects an average of approximately RM185 million in gross rental over 10 years upon commencement of the lease. It will also acquire Menara TM Semarak, which has a total net lettable area of 324,155 sq ft, for RM72 million; the transaction is expected to be completed by end-1Q2024. Plans are also afoot for a data centre for an external party to be sited in the building along with initiatives to improve overall occupancy levels. Notwithstanding the long-term recurring income from these assets, the new ventures pose execution risk although this is mitigated by Titijaya’s long track record in property development. 

For the financial year ended June 30, 2023 (FY2023), revenue rose 31.9% y-o-y to RM362.6 million on higher inventory sales. Pre-tax profit improved to RM16.7 million, underpinned by higher-margin projects in Jalan Ampang, Kota Kinabalu and Klang. 

As at end-June 2023, borrowings came down meaningfully by 45% to RM226.3 million (end-FY2022: RM412.0 million), supported by strong top-line growth and faster receivables collection. The debt-to-equity (DE) ratio accordingly improved to 0.18x as at end-FY2023, from 0.32x a year ago. Going forward, borrowings are expected to rise moderately for working capital needs but DE ratio is likely to remain below 0.5x. Liquidity is strong with a cash balance of RM199.9 million.

Farhan Darham, +603-2717 2945/ farhan@marc.com.my 

Fatin Sadiqah Saberam, +603-2717 2934/ fatin@marc.com.my  

Yazmin Abdul Aziz, +603-2717 2948/ yazmin@marc.com.my