MARC Ratings has affirmed its ratings of MARC-1IS/AA-IS on UEM Sunrise Berhad’s Islamic Commercial Papers (ICP)/ Islamic Medium-Term Notes (IMTN) Programme (ICP/IMTN-3) with a combined nominal value of RM4.0 billion. Concurrently, the rating agency has also affirmed its rating of AA-IS on UEM Sunrise’s two RM2.0 billion IMTN Programmes (IMTN-1 and IMTN-2). The ratings outlook is stable.
UEM Sunrise’s track record in property development, sizeable landbank and healthy liquidity position remain key rating drivers. Moderating the ratings are the group’s relatively fewer property launches and its reliance on future land sales to drive financial performance. Its long-term ratings benefit from a one-notch uplift based on implicit parental support given its position as a key property development group under UEM Group Berhad.
For 2024, UEM Sunrise is expected to launch projects with a modest combined gross development value (GDV) of RM800 million compared to RM3.6 billion in the previous year. In terms of land sales, the group registered only RM62.7 million during 1H2024. This notwithstanding, given the positive prospects for property projects in Johor where UEM Sunrise has sizeable landbank of about 4,900 acres (including joint-venture development land), the group is expected to benefit from the renewed demand for industrial developments in the state over the medium term. As at end-June 2024, UEM Sunrise’s ongoing domestic projects had a combined GDV of RM4.8 billion, of which about 90% is in the Klang Valley where residential property demand has been more resilient. Its overall take-up rate for ongoing projects stood at about 70%. Domestic unbilled sales of RM1.9 billion as at end-June 2024 provide earnings visibility over the next three years.
UEM Sunrise’s overseas projects, namely high-rises in Collingwood, Melbourne, and in Subiaco East, Perth, with GDV of RM874 million and RM1.5 billion, will further strengthen its property profile in Australia where it has successfully completed several projects. The Collingwood project, of which construction will begin in mid-2026 and is expected to be completed by 2029, has been fully sold to US-based Greystar Real Estate Partners, LLC, thereby eliminating demand and funding risks. UEM Sunrise is the project manager for this project whereas for the Subiaco East project, it will be the main developer, with construction commencing in 1Q2026. The wholly-owned project will be funded through a mixture of bank borrowings and internal funds.
For 1H2024, UEM Sunrise recorded lower revenue of RM430.2 million and pre-tax profit of RM36.8 million (1H2023: RM604.7 million; RM72.6 million). Pre-tax margin remained thin at 8.6%. Inventory level has been on a declining trend over the past five years, to RM110.4 million in 1H2024 compared to RM540.6 million in 2019.
Group borrowings remained unchanged at RM4.2 billion; RM3.7 billion or 88% was accounted for by the outstanding under the rated sukuk programmes. Gross debt-to-equity ratio which stood at 0.61x is expected to remain moderate over the near-to-medium term, taking into consideration the group’s borrowing maturity profile and the additional borrowings to fund the Subiaco East project. Cash balances stood healthy at RM1.2 billion as at end-June 2024. The existing programmes provide sizeable headroom to refinance maturing sukuk totalling RM2.3 billion in 2025 and 2026.