MARC has affirmed its rating of MARC-2IS on Titijaya Land Berhad’s (Titijaya) RM150 million Islamic Commercial Papers (ICP) Programme. The outstanding notes under the programme stood at RM70.0 million as at end-September 2021.
The rating incorporates Titijaya’s track record in developing projects in and around mature housing areas, and its moderate leverage and liquidity positions. Moderating factors are the challenging outlook for the domestic property market that has weighed on Titijaya’s take-up rate and its higher inventory level.
Titijaya has several ongoing developments, mainly in the Klang Valley and Sabah, with a combined gross development value (GDV) of RM1.6 billion as at end-June 2021. Overall take-up rate recorded a slight improvement to 53.0% as at end-June 2021 (end-March 2020: 47.3%). Office developments at 3rdNvenue and Riveria City in Kuala Lumpur, which accounted for 60% of total GDV, have achieved moderate take-up rates of 55.7% and 68.8%. However, take-up rates for its two ongoing serviced apartments, Damaisuria and The Shore, remained weak at 19.7% and 48.2%. Given its moderate overall take-up rate, completed inventory level, which rose by 6.9% y-o-y to RM211.4 million as at end-June 2021, could rise further in the near term. We understand that the group is also focusing on reducing its inventory. This has been evident by recent clearance of inventories amounting to RM44.6 million since mid-July 2021.
In FY2021, Titijaya recorded 53.4% y-o-y higher revenue, mainly driven by progress billings under the relaxed movement restrictions. However, operating profit margin declined to 8.5% (FY2020: 12.5%) due to a RM20.1 million impairment on its joint venture development, Odeon (along Jalan Tuanku Abdul Rahman). Excluding the impairment, operating profit margin would stand at about 16%. Its debt-to-equity ratio remained moderate at 0.44x.
Titijaya’s available landbank of 127.5 acres would be supportive of development potential and is a source of additional liquidity. Unbilled sales of RM337.0 million as at end-June 2021 should be adequate to fund next year’s working capital requirement estimated at RM301.5 million. The group continues to defer new property launches to FY2022; this has eased working capital concerns and provided headroom to better manage cash flows. As at end-June 2021, Titijaya’s near-term term loans of RM64.8 million can be met via cash balance of RM173.1 million and undrawn project lines of about RM481 million.