MARC Ratings has assigned a preliminary short-term rating of MARC-1IS to Titijaya Land Berhad’s (Titijaya) proposed RM300 million Islamic Commercial Papers (ICP) Programme. Concurrently, the rating agency has affirmed its existing MARC-1IS rating on the group’s RM150 million ICP programme which will expire on November 8, 2024. The new programme will replace the existing programme on expiry.
Titijaya’s established property development track record, as well as its low leverage and healthy liquidity positions are key rating drivers. The rating is weighed by the group’s moderately sized property development projects, the execution risk posed by its new business ventures and the soft property market conditions that could impact demand.
Titijaya’s ongoing projects had a total combined gross development value (GDV) of RM992.2 million as at end-March 2024 and are mainly in the Klang Valley where demand is relatively more resilient. The majority of the ongoing GDV is derived from the Riveria City Phase 2 serviced apartments launched in FY2024 and Damaisuria Seiring Residensi Phase 1A serviced apartments. Excluding recent launches in FY2024, the average take-up rate would be 78.0% (FY2023: 79.7%). Its key completed developments in 2023, 3rdNVenue Phase 1 office suites (GDV: RM577.0 million) in Jalan Ampang, KL, and The Shore serviced suites (GDV: RM405.7 million) in Kota Kinabalu, Sabah, have achieved stronger take-up rates of 96.0% and 83.6%. Unbilled sales of about RM235.8 million as at end-March 2024 provide earnings visibility over the next two years.
The rating agency understands that Titijaya will continue with its strategy of undertaking residential and commercial developments in matured neighbourhoods within the Klang Valley while expanding into other property segments to diversify its revenue base. This includes its built-to-let logistics commercial complex for DHL Properties (M) Sdn Bhd at the Bayan Lepas Waterfront in Penang. The construction is expected to be completed by October 2024 following a three-month delay owing to a mishap at the site that has since been resolved. The complex will be leased for 10 years under an incremental lease structure with an estimated gross annual rental of RM18.5 million on average.
Moving forward, revenue will be supported by recurrent income from the commencement of operations of its newly built hotel, Citadines Waterfront Kota Kinabalu (Citadines) in Sabah. This hotel is one of the buildings developed and owned by Titijaya in Kota Kinabalu. Operated by Ascott under the brand of Citadines, the hotel had a soft launch in February 2024. Ascott, as the operator, will receive a management fee, and an additional incentive fee based on the hotel’s performance. As at end-June 2024, the hotel has achieved an occupancy rate of 64.0% with 110 rooms opened out of a total of 396 rooms. The group plans to open the remaining 286 rooms by end of 2024. Annual revenue contribution from the hotel’s operations is expected to be around RM25.0 million, assuming a 70.0% occupancy rate. Apart from this, Titijaya also expects recurring income from the acquisition of Menara TM Semarak (total net lettable area of 313,965 sq ft) which is still ongoing.
For the first nine months of financial year ended June, 2024 (9MFY2024), Titijaya recorded revenue of RM199.1 million, which was 19.5% lower y-o-y due to the recent completion of several projects, with new projects still in the early construction stages. Operating profit declined by 23.5% y-o-y to RM40.1 million which was further weighed down by higher raw material cost. Meanwhile, borrowings stood at RM240.7 million (FY2023: RM224.7 million) with the debt-to-equity (DE) ratio remaining low at 0.18x. Going forward, borrowings are expected to rise moderately for working capital and investment purposes. Assuming a full drawdown of RM300 million under the new programme, the DE ratio would rise to 0.41x. Liquidity position, as reflected by cash and short-term deposits of RM155.1 million as at end-9MFY2024, is healthy relative to group borrowings.