MARC Ratings has affirmed its ratings of AAA, AA and B- on special purpose vehicle Special Coral Sdn Bhd’s RM250.0 million Senior Class A Medium-Term Notes (MTN), RM50.0 million Senior Class B MTN and RM800.0 million Subordinated Class MTN under the existing RM1.1 billion MTN programme. The ratings outlook is stable. Special Coral owns about 91.6% of the strata area in Queensbay Mall, an eight-storey shopping complex in Penang with a net lettable area (NLA) of 880,841 sq ft.
The affirmed ratings reflect the MTN classes’ loan-to-value (LTV) ratios which remain within the respective benchmarks MARC Ratings applies for the rating bands. Based on the valuation of Queensbay Mall using MARC Ratings’ income capitalisation approach, the Class A MTN, Class B MTN and Subordinated Class MTN have LTV ratios of 42.1%, 50.5% and 185.0%. Under this approach, the mall is valued at RM594.4 million which represents a 39.6% discount from the market value of RM984.5 million based on the recent acquisition of the 433 strata parcels within the Queensbay Mall by CapitaLand Malaysia Trust (CLMT) in November 2022.
As at end-2022, occupancy level remained strong at 98.7% (2021: 95.8%) of total NLA of 880,841 sq ft, as demand for retail space recovered as the domestic economy improved post-pandemic. Tenancy renewal risk has been largely mitigated by the management’s strong track record of achieving high tenant retention.
For 2022, Special Coral’s financial performance reflected strong recovery to pre-pandemic levels, with revenue increasing by 25.5% y-o-y to RM106.5 million. It also recorded a 52.3% y-o-y increase in net operating income to RM76.5 million. Debt service cover ratio continues to remain healthy at 7.20x and 5.83x for Class A and Class B MTN. Following the acquisition of the aforementioned strata parcels by CLMT, Special Coral intends to redeem the aforementioned MTNs.