MARC Ratings has downgraded its rating on YNH Property Berhad’s (YNH) RM700.0 million Islamic Medium-Term Notes Programme (Sukuk Wakalah) to BIS from BBIS and placed the rating on MARCWatch Negative.
The downgrade reflects YNH’s materially weakened liquidity profile and heightened refinancing and repayment risk, underpinned by weak internal cash flow generation, continued dependence on asset disposals to meet financial obligations and limited earnings visibility. These pressures are compounded by a shortfall in the sukuk reserve account, which has resulted in a technical default.
The MARCWatch Negative placement reflects the significant uncertainty surrounding YNH’s ability to meet its RM170.0 million sukuk maturity on 26 February 2027, with repayment depending largely on the timely completion of planned asset disposals. While the expected disposal proceeds could provide sufficient liquidity to meet the maturity, any further delay or failure to complete the transactions as envisaged would materially increase repayment risk.
YNH is required to progressively accumulate 50% of the RM170.0 million sukuk maturity ahead of its due date. As of 27 October 2026, the reserve account balance stood at RM54.4 million, RM6.8 million below the required RM61.2 million, resulting in a technical default. The shortfall is required to be rectified within the 30-day remedy period to avert an event of default. While YNH has indicated its intention to remedy the shortfall within the permitted period, the occurrence of the reserve-account shortfall nonetheless underscores the company’s constrained liquidity and limited capacity to meet its funding requirements through internally generated cash flows.
Repayment of the sukuk is substantially dependent on the proposed RM170.0 million disposal of its Desa Sri Hartamas land to Sunway Living Space Sdn Bhd. The transaction, first announced in May 2023 and subsequently extended several times, is currently expected to become unconditional by end-November 2026, with completion targeted for January 2027. After repayment of the land’s outstanding loan of approximately RM65.0 million, estimated net proceeds of RM105.0 million are expected to be available for the sukuk repayment. Given the proximity of the expected disposal completion to the February 2027 sukuk maturity, however, YNH has limited headroom to absorb any further delays in the transaction.
YNH is also disposing of a 2.6-acre freehold land parcel along Jalan Sultan Ismail, Kuala Lumpur, to Chin Hin Property (JSI) Sdn Bhd for RM455.0 million. The transaction is expected to be completed by January 2027, comprising RM409.5 million in cash and RM45.5 million in redeemable preference shares of an indirect 70%-owned subsidiary of Chin Hin Group Property Berhad. The cash proceeds are intended to fully redeem YNH’s RM350.0 million outstanding unrated perpetual bond and settle the outstanding coupon obligations. While the two disposals could provide substantial liquidity relief and facilitate deleveraging, YNH’s immediate financial position remains highly dependent on their timely execution.
YNH’s weak operating performance provides limited support to its liquidity position. Revenue declined to RM106.9 million in FY2026, reflecting limited progress billings from ongoing projects. The group currently has few active developments, principally Solasta Dutamas in Kuala Lumpur and its shop lot development in Manjung, Perak. The limited development pipeline constrains near-term earnings and operating cash flow generation, reducing YNH’s capacity to rebuild liquidity organically.