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

MRCB’s longstanding track record as a property developer in transit-oriented developments (TOD), and its sizeable outstanding construction order book comprising large infrastructure projects remain key rating drivers. The rating also acknowledges MRCB as an important affiliate of the Employees Provident Fund.

As at end-March 2022, MRCB’s outstanding external order book of RM7.6 billion includes key infrastructure projects in the Klang Valley, namely the Light Rail Transit 3, the Mass Rapid Transit 2, and the Damansara – Shah Alam Elevated Expressway. The group continues to tender for new infrastructure projects, for which open tenders stood at RM370 million as at end-March 2022. Operating margin for the construction division, however, stood at a low of 4.2% in 1Q2022 and could come under pressure from higher raw material costs.

MRCB’s ongoing property projects have a total gross development value of RM2.7 billion as at end-March 2022, with a moderate total take-up rate of 67%. Among these is the Sentral Suites, a TOD project which has achieved a strong take-up rate of 84%; unbilled property sales of RM818 million provide earnings visibility over the near term. The group’s inventory level of completed unsold units decreased to RM349.7 million in 1Q2022 (end-2021: RM364.7 million); this amount could decline by about RM189 million following the en-bloc sale of commercial units at 9 Seputeh.

For 1Q2022, the group recorded improved y-o-y revenue and operating profit of RM810.7 million and RM52.3 million (1Q2021: RM226.7 million; RM14.9 million). Total borrowings stood at RM2.0 billion as at end-March 2022, of which outstanding under the Sukuk Murabahah accounted for RM1.4 billion or 70%. Profitability will be supported by its sizeable outstanding construction order book, while the resumption of construction works will contribute towards more regular billing collection. The rating remains moderated by the challenging operating environment for construction players, as well as by the prevailing uncertainty in the domestic property market.