MARC Ratings has affirmed its ratings on Putrajaya Holdings Sdn Bhd’s (PJH) outstanding issuances as follows:
• RM1.0 billion 20-year Sukuk Wakalah Programme (due 2041) at AAAIS;
• RM370.0 million Sukuk Musharakah Programme (due 2030) at AAAIS;
• RM3.0 billion Sukuk Musharakah Programme (due 2032) at AAAIS; and
• RM1.5 billion Sukuk Musharakah Medium-Term Notes (MTN) Programme (due 2033) at AAAIS.
The outlook for all ratings is stable.
The ratings affirmation is premised on the sizeable and predictable rental income from the Malaysian government as the principal lessee of government buildings in Putrajaya. The buildings are tenanted under individual long-term lease-and-sublease agreements between the government and PJH. The rental income stream is deemed sufficient to meet the financial obligations under the rated programmes.
In 1Q2022, PJH recorded revenue and pre-tax profit of RM455.8 million and RM219.2 million (2021: RM1.9 billion; RM872.6 million). It receives an annual lease rental income of RM1.4 billion which is more than sufficient to meet principal repayments of between RM470.0 million and RM835.0 million annually over the next five years. With continued repayments, borrowings are trending down, standing at about RM4.1 billion at end-2021 from about RM5.1 billion in the previous year. Consequently, debt-to-equity ratio has improved to 0.42x from 0.55x.
We also note that as the development of government buildings has reached its tail end, PJH has increased its undertaking of commercial and residential property projects, mainly in Putrajaya. While its involvement in private development projects poses some concern amid a weak property market and moderate take-up rate for its residential units, we note that its exposure remains small relative to its core lease receivables activity. The group has deferred most of its commercial project launches for now to focus on clearing its completed inventories.