MARC Ratings has affirmed its rating of A+IS on Sunsuria Berhad’s RM500.0 million Sukuk Wakalah Programme. The rating outlook is stable.
The rating affirmation incorporates Sunsuria’s development approach through joint ventures, its low net leverage and strong liquidity position. The rating also factors in the prevailing challenging domestic property market outlook that has weighed on demand, and the impact of a rising cost environment on operating margins.
Total ongoing gross development value (GDV) stood at RM1.9 billion as at end-March 2022, of which about 10% is within the 375-acre Sunsuria City township in Salak Tinggi, Selangor. This flagship township development, scheduled for completion by end-2032, will provide continued development opportunities anchored around its catalyst development, Xiamen University Malaysia. Sunsuria’s other ongoing developments comprise the Forum II project in Setia Alam, Selangor and the Bangsar Hillpark project in Bangsar, Kuala Lumpur. Its ongoing projects recorded a moderate overall take-up rate of 59.2% as at end-March 2022. Against weakening demand, inventory level rose to RM113.2 million as at end-March 2022 from RM43.7 million a year prior.
We continue to view the group’s joint-venture approach to property development, which reduces initial capital outlay, and its ability to manage development construction internally as key factors that have contributed to healthy property margins despite some weakening in recent periods. Operating profit margin declined to 16% from above 20%. For the nine months ended June 2022 (9MFY2022), revenue rose by 74.7% y-o-y to RM302.3 million following the easing of operational restrictions and resumptions of economic activities. Cash flow from operations of RM200.6 million was mostly supported by sales of completed units at its Sunsuria City township. Its unbilled sales of RM889.3 million provide earnings visibility through 2024.
Group borrowings declined to RM452.6 million as at end-9M2022 (FY2021: RM530.0 million). Leverage has remained low with net debt-to-equity ratio standing at 0.13x with strong cash balance of RM319.4 million. Coupled with unutilised credit facilities of RM205.1 million, its liquidity position provides funding source to support its construction requirements over the near term.