MARC has assigned preliminary ratings of MARC-1IS /AA-IS to UEM Sunrise Berhad’s proposed Islamic Commercial Papers (ICP) Programme and Islamic Medium-Term Notes (IMTN) Programme with a combined nominal value of RM4.0 billion (ICP/IMTN-3). We have concurrently affirmed the existing ratings of MARC-1IS /AA-IS on its two ICP and IMTN programmes (ICP/IMTN-1 and ICP/IMTN-2) with a total combined nominal value of RM4.0 billion. All ratings carry a stable outlook.
Proceeds from the issuances under the proposed ICP/IMTN-3 will be utilised to refinance the outstanding sukuk under the existing ICP/IMTN-1 and ICP/IMTN-2. As at end-October 2021, the outstanding under ICP/IMTN-1 and ICP/IMTN-2 were RM1.96 billion and RM1.65 billion, of which a combined RM450.0 million notes will mature in 2022. Our rating assessment is premised on the consolidated leverage (debt-to-equity (DE) ratio) not exceeding 0.75x.
The key rating drivers are the group’s commendable operating track record, its large unbilled sales that provide medium-term earnings prospects, and its sizeable landbank that is supportive of future development activities. The long-term rating benefits from a one-notch uplift for parental support from UEM Group Berhad, based on our assessment that the company is a strategic subsidiary of its parent.
UEM Sunrise’s ongoing developments comprise 22 projects with a combined gross development value (GDV) of RM8.6 billion, which have registered a strong overall take-up rate of 86.7% at end June-2021. We believe this reflects the group’s healthy delivery track record and good locations in the Klang Valley. Sizeable unbilled sales of RM2.0 billion as at end-June 2021 provide earnings visibility through 2023. We also note that its inventory level has trended down to RM403.2 million at end-June 2021 from RM468.4 million at end-2020.
In 1H2021, UEM Sunrise recorded higher revenue of RM501.8 million (1H2020: RM307.8 million), in line with progress billing cycles and inventory sales. The group recorded pre-tax loss of RM27.3 million during the period, mainly due to weak performance of its retail properties. Group borrowings rose to RM4.3 billion from RM4.1 billion at end-2020, translating to a DE ratio of 0.62x as at end-June 2021. UEM Sunrise’s liquidity position remained strong, supported by substantial proceeds from the en-bloc sale of serviced apartments in its Aurora Melbourne Central project in Australia, of about AUD125 million.