MARC Ratings has affirmed its ratings of AAIS /AA on funding vehicle OSK Rated Bond Sdn Bhd’s (OSKRB) Sukuk Murabahah/ Multi-Currency Medium-Term Notes (Sukuk/MCMTN) Programmes with a combined limit of up to RM3.5 billion. The ratings’ outlook is stable. The ratings apply only to ringgit-denominated sukuk/notes under the programmes. The programmes carry an unconditional and irrevocable guarantee from OSK Holdings Berhad (OSK).
OSK’s steady group financial performance, underpinned by its strong balance sheet, remains a key rating driver. Moderating the ratings are the potential slowdown in economic growth and weakening consumer sentiment that would weigh on its two key businesses, namely property development and financial services.
Ongoing domestic property projects had a combined gross development value (GDV) of RM3.1 billion and an average take-up rate of 56% as at end-June 2025. The projects comprise new phases within existing townships — Iringan Bayu in Seremban, Negeri Sembilan, and Bandar Puteri Jaya in Sungai Petani, Kedah — and high-rise developments in the Klang Valley and Butterworth, Penang. For 1H2025, revenue from its property development segment declined slightly by 4% y-o-y to RM401.1 million, partly reflecting slower take-up of certain ongoing projects. In particular, the substantial release of higher-priced units in the Iringan Bayu township and weaker market conditions in Penang and Kedah have dampened sales. The current sales performance notwithstanding, overall domestic unbilled sales of RM818.0 million as at end-June 2025 would provide the group sufficient liquidity to complete construction works of its developments. Inventory of completed property units remained low at RM11.8 million.
OSK’s key overseas property project in Melbourne, Australia, is undertaken by a joint venture with the Employees Provident Fund (EPF, 49%). Phase 1 of the Melbourne Square development with a GDV of RM2.5 billion was completed in early 2021 and has achieved strong sales of 93%; Phase 2, with a GDV of RM1.9 billion, was launched in October 2023 and 70% sold as at end-1H2025.
The group’s financial services segment — which provides capital lending through its capital financing division — has been growing rapidly. OSK’s capital financing portfolio expanded to RM2.6 billion as at end-June 2025 (end-2024: RM2.2 billion), mainly driven by its expansion into Australia and the offering of Shariah-compliant financing domestically through the ANGKASA salary deduction scheme for civil servants. Credit exposure in Australia, mainly in the commercial real estate segment, rose to RM702 million, accounting for 27% of OSK’s total financing portfolio (1H2024: RM525 million). Non-performing loans stood at 3.5% as at end-June 2025, with an average collateral cover of 2.4x, reflecting strong recoverability to OSK. Pre-tax profit increased 18% y-o-y to RM60.6 million, while revenue grew 32% to RM141.6 million, in line with the group’s portfolio expansion.
For 1H2025, group revenue and pre-tax profit improved to RM911.2 million and RM295.6 million (1H2024: RM736.4 million; RM282.8 million). Domestic unbilled sales underline earnings visibility over the next two years. Consolidated borrowings increased to RM4.4 billion as at end-June 2025, with gross debt-to-equity (DE) and net DE ratios standing at 0.66x and 0.52x. The bulk of proceeds from new borrowings have been used to expand the group’s capital financing business, excluding which adjusted DE ratio would stand at 0.37x. The group’s 2,449-acre landbank with a book value of RM1.04 billion, mainly located within its two townships, provides future development opportunities and, hence, earnings visibility.