MARC has affirmed its short-term rating of MARC-2IS on Bina Darulaman Berhad’s (BDB) RM100.0 million Islamic Commercial Papers (ICP) Programme with a stable outlook.
The rating incorporates BDB’s competitive strength to be able to undertake public infrastructure and construction contracts in Kedah, its moderate position as a property developer, its moderate leverage position and adequate cash balances. The rating also factors in its status as a Kedah state-owned entity that will support its ability to bid for state contracts.
MARC notes that while the impact from the COVID-19 pandemic has weighed on the group’s business plans and activities during the period, BDB’s focus on optimising cost and unlocking asset value has helped to sustain its performance in 2020. Over the near term, BDB’s focus on the relatively resilient affordable segment of the property market with an ongoing gross development value (GDV) of RM165.7 million is expected to support its property development activities. This notwithstanding, the prospects for the domestic property sector, including in Kedah where the bulk of its projects is concentrated, will be challenging and remain a moderating rating factor.
Its construction division, which had an order book of RM27.4 million at end-2020, is likely to gain from more contracts from the upcoming implementation of water projects in Kedah following an award to upgrade works on a water treatment plant in Pelubang. Other contracts it has received include a RM40.0 million government contract to undertake a non-revenue water project in Perlis. BDB’s recent three-year road maintenance contract valued at RM210.0 million, provides a steady but modest earning stream. It also entered into a joint venture with Menteri Besar Kedah Incorporated to develop the Langkawi Art Box (The LAB, previously known as Langkawi Premium Outlet). Its leisure division, whose performance worsened due to the movement restrictions, remains a drag on profitability.
Group’s debt-to-equity remained low at 0.27x (2019: 0.28x). The refinancing risk, however, is substantially mitigated by its healthy liquidity position with cash and bank balances of RM69.8 million, translating into a cash-debt cover of 56%.