MARC has affirmed its AAIS rating on Fortune Premiere Sdn Bhd’s RM3.0 billion Multi-Currency Islamic Medium-Term Notes Programme (Sukuk Murabahah). The rating outlook has been revised to negative from stable. Fortune Premiere is a funding vehicle for parent IOI Properties Group Berhad which has extended an unconditional and irrevocable guarantee on the issuance.
The revised outlook is premised on the weakening in IOI Properties’ debt metrics due to the increase in the borrowings level to an expected RM15.7 billion from RM11.0 billion as at end-June 2021 (FY2021). The new borrowings will fund the acquisition of a 0.78ha land parcel in Marina View, Singapore amounting to SGD1.5 billion (about RM4.68 billion). As a result, group debt-to-equity (DE) ratio will rise to about 0.80x from 0.56x. In addition, inventory level has also increased to RM2.4 billion as at end-FY2021 (FY2020: RM2.2 billion).
The affirmed rating reflects IOI Properties’ well-established market position and strong track record in domestic property development that provides the group with healthy operating profit and margin. Its unbilled sales of about RM800 million provides earnings visibility over the near term. The rating is moderated by the group’s exposure to market risk for its projects. For FY2021, IOI Properties launched 10 domestic projects with a combined gross development value (GDV) of about RM1.2 billion, mainly located within its existing townships. Ongoing projects carry a GDV of RM2.6 billion, of which Malaysia accounted for 74% and the remaining 26% in China with average take-up rates of 48% and 60%.
Over the medium term, the success of its key investment property project, IOI Central Boulevard Towers (GDV: SGD3.7 billion or RM11.4 billion) in Singapore would provide a major boost to its rental revenue stream. This project is expected to be completed by 2H2023. The recently acquired Marina View land parcel is expected to be converted into a residential development to complement its nearby IOI Central Boulevard Towers project.
Overall revenue grew by 17.6% y-o-y to RM2.5 billion in FY2021, mainly driven by the domestic property development segment. This offsets the lower contribution from the property investment, and hospitality and leisure segments which had been impacted by pandemic-induced closures. For the property investment segment, rental rebates have been given to tenants, while the hospitality and leisure segment was considerably impacted by travel restrictions. As a result, operating profit was lower by 6.7% y-o-y to RM714.2 million. The group has a sizeable cash balance of RM1.8 billion as at end-FY2021.