The rating incorporates Titijaya’s track record in developing projects in and around mature housing areas to mitigate demand risk, and its moderate leverage and liquidity positions. Moderating factors include the continuing challenging outlook for the domestic property market that has weighed on Titijaya’s take-up rate and could lead to a rise in inventory level.

Titijaya has several ongoing developments, mainly in the Klang Valley and Sabah, with a combined gross development value (GDV) of RM1.7 billion as at end-March 2020. It has substantially reduced launches in recent years, with only one residential development with a GDV of RM214.1 million launched in 2019. Given that its office developments -3rdNvenue and Riveria – collectively account for 56% of total ongoing GDV, MARC remains concerned on the take-up rates in this segment. The demand for office-built space has continued to weaken in the face of increased supply and the ongoing pandemic, which has altered workplace arrangements. The take up rate for ongoing projects as at end-March 2020 stood at a moderate 47.3% (53.4% excluding the new launch in July 2019).

Inventory level stood at RM196.5 million as at end-June 2020 (FY2020), slightly lower than RM202.1 million at end-FY2019 and comprised mostly high-rise residential units. MARC understands that Titijaya’s future launches with a GDV of about RM2.5 billion which were initially scheduled for 2019/2020 have been deferred to beyond 2021. The deferment would reduce the strain on its working capital requirements. Titijaya’s available landbank of 118.6 acres, mostly in prime locations, would be supportive of development potential, and is a source of additional liquidity.

For FY2020, Titijaya recorded a 47.1% and 67.0% y-o-y decline in revenue and operating profit, reflecting the soft property market. Operating profit margin was lower at 12.5% from 19.9% due largely to price reductions among other measures, to support sales. Its debt-to-equity (DE) ratio remained moderate at 0.39x at end-June 2020. Titijaya’s liquidity requirement in the next 12 months comprise a term loan repayment of RM30.4 million and an estimated working capital requirement of about RM100.6 million. Cash and short-term deposits of RM158.7 million are sufficient to service its near-term obligations, while undrawn project lines of RM331.7 million provide a source of additional liquidity.

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