MARC Ratings has affirmed its ratings on Berjaya Land Berhad’s (BLand) RM500.0 million Medium-Term Notes (MTN) Programme guaranteed by Danajamin Nasional Berhad at AAA(fg) and RM150.0 million MTN Programme guaranteed by OCBC Bank (Malaysia) Berhad at AAA(bg). The ratings outlook is stable. Currently, there is an outstanding of RM225 million under the Danajamin-guaranteed programme. There is no outstanding under the bank-guaranteed programme.
The affirmed ratings reflect the unconditional and irrevocable guarantees provided by Danajamin and OCBC Malaysia. Danajamin carries a financial insurer rating and counterparty rating of AAA/Stable while OCBC Malaysia has a financial institution rating of AAA/Stable based on public information. In regard to the Danajamin-guaranteed programme, upon the completion of the amalgamation exercise of Danajamin and Bank Pembangunan Malaysia Berhad (BPMB), the guaranteed programme will carry BPMB’s AAA/Stable rating.
BLand is an investment holding company with interests in companies involved in the gaming, motor, property, and hotel and recreation sectors. Its standalone credit profile remains modest, characterised by low liquidity and sizeable debt obligations. The holding company’s dividend income has not been sufficient to meet its high financing cost and has relied on proceeds from asset disposals and refinancing to address its financial obligations.
Earnings performance continued to be supported by main subsidiary Sports Toto Berhad which is involved in gaming through 100%-owned STM Lottery Sdn Bhd, and motor retailing business in the United Kingdom (UK) through 100%-owned H.R. Owen Plc. For the financial year ending June 30, 2022 (FY2022), the motor retailing business and gaming operations recorded revenue of about RM3.0 billion and RM2.2 billion, accounting for 49.8% and 36.4% of group revenue.
Its domestic property development activities have remained modest, limited to the Tropika mixed development in Bukit Jalil with a gross development value (GDV) of RM852.6 million. The residential component has recorded an 82% take-up rate as of June 30, 2022 (FY2022). For FY2022, BLand’s consolidated revenue and operating profit grew to RM6.0 billion and RM261.7 million (FY2021: RM5.4 billion; RM150.6 million). This was largely driven by the improved demand for luxury cars in the UK and recovery in the performance of the hotel and resorts operations. Operating profit margin for its motor retailing business remains thin. Group borrowings, however, rose to RM3.4 billion as at end-FY2022 (FY2021: RM3.1 billion) on account of a higher working capital requirement to fund its motor retailing and property operations. BLand has faced delays in completing some of its asset disposals abroad partly due to cross-border issues. Its liquidity position is supported by cash balance of RM824.1 million as at end-FY2022.
At the holding company level, revenue, which comprises entirely of dividend income, declined mainly due to lower dividend income from its gaming subsidiary. The loss before tax in FY2022 is attributable to loss arising from the disposal of subsidiaries amounting to RM168.6 million and high finance costs of RM97.0 million.