Posted date: July 26, 2021

MARC has affirmed its AA-IS rating on Malaysian Resources Corporation Berhad's (MRCB) Islamic Medium-Term Notes Programme of up to RM5.0 billion (Sukuk Murabahah) with a stable outlook.

MRCB's well-established market position in property development with a focus on transit-oriented developments (TOD), and in the construction sector in which it maintains a sizeable order book remains a key rating factor. The rating also incorporates the support extended by its key shareholder, the Employees Provident Fund Board (EPF), including in the form of equity participation with MRCB in developments which reduces funding risk.

MRCB has ongoing projects — mainly in the Klang Valley — with a total gross development value standing at RM2.8 billion as at end-March 2021, including the RM1.5 billion Sentral Suites development that achieved a healthy take-up rate of 84%. Its other projects including Tria 9 Seputeh and Alstonia recorded moderate take-up rates, contributing to an overall take-up rate of 63%. The group is expected to remain cautious in undertaking new launches and will focus on improving unit sales of ongoing projects as well as reducing inventory level which had risen to RM450.9 million as at end-March 2021. MRCB has unbilled sales of RM1.0 billion that provide earnings visibility through 2023.

MRCB's ongoing construction order book of RM10.8 billion as at end-March 2021 includes Light Rail Transit 3 (LRT3) (RM5.7 billion) and the Kwasa Utama Plot C8 development (RM3.1 billion). Given that infrastructure construction works have been allowed to continue during the current movement control order (MCO) period, progress billings are less likely to be impacted. Nonetheless, the earlier MCO periods had impacted the group's performance in 2020 through 1Q2021 due to delays in progress billings arising from stalled property development and construction activities. The group recorded impairment provisions of RM177.8 million for completed construction projects in the hospitality sector in 2020 that contributed to pre-tax losses of RM152.9 million. In 1Q2021, there was a turnaround to pre-tax profit of RM5.7 million.

Total borrowings stood at RM1.8 billion with a moderate gross leverage position of 0.4x as at end-March 2021. Additionally, it has sizeable unutilised credit lines and a moderate liquidity position that provide some financial flexibility.

Lim Wooi Loon, +603-2717 2943/ wooiloon@marc.com.my;
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my.

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