MARC has affirmed its ratings on Putrajaya Holdings Sdn Bhd’s (PJH) issuances under the following programmes:

The ratings affirmation and outlook are premised on the predictable and sizeable rental income from the Malaysian government as the principal lessee of the government buildings in Putrajaya that were constructed by PJH. The buildings are tenanted under several long-term lease-and-sublease agreements between PJH and the government. The rental income is deemed more than sufficient to meet the financial obligations under the rated issuances. The ratings also incorporate PJH’s developmental track record as the master developer of the federal administrative centre in Putrajaya and the credit strength of its major shareholders who are government-linked. 

As at end-December 2019, PJH had delivered 41 government building projects with a total gross built-up area of 42.3 million sq ft, including the 4.8 million sq ft Parcel F development completed in April 2019. As construction of government buildings reached the tail end, PJH has increased its undertaking of commercial and residential property projects which are located mainly in Putrajaya. MARC views that these projects pose an increased market risk amid weak property market conditions and are a departure from PJH’s mainstay of lease-and-sublease arrangements with the government that provide assured payment streams. Nonetheless, non-government related projects remain modest at this juncture. Total property inventory stood at RM349.0 million as at end-December 2019, of which more than half comprises semi-detached houses priced above RM2.0 million. Overall, the average take-up rate for PJH’s ongoing residential projects is 49% during the period. 

For 2019, PJH recorded revenue and operating profit of RM2.1 billion and RM1.1 billion. Cash flow from operations increased to RM1.3 billion from RM886.5 million in the previous year, mainly from reducing property inventories related to affordable housing units in Precinct 5. Its debt-to-equity declined to 0.64x from 0.72x in the previous year. PJH derives annual lease rental income of RM1.6 billion which is more than sufficient to meet principal repayments of between RM480.0 million and RM835.0 million annually over the next five years. PJH retains a strong liquidity position with a moderate dividend payout of about 30% of its annual net profit.

Gan Peishi, +603-2717 2948/ peishi@marc.com.my; 

Raj Shankar, +603-2717 2956/ rajshankar@marc.com.my; 

Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my