MARC AFFIRMS ITS B RATING ON DUTALAND BERHAD’S OUTSTANDING REDEEMABLE UNSECURED LOAN STOCKS

Nov 19, 2012 -

MARC has affirmed its B rating on DutaLand Berhad’s (DutaLand) outstanding RM13,121,392 Redeemable Unsecured Loan Stocks (RULS) with a stable outlook. The rating action reflects DutaLand’s weak business profile that is characterised by inconsistent performance of its property and plantation divisions and the group’s continued reliance on asset disposals to generate liquidity to meet its financial commitments.

DutaLand’s major property project is the 73-acre Kenny Heights Development (KHD), a high-end mixed development located in the Sri Hartamas vicinity in Kuala Lumpur. MARC notes that the progress on the KHD project has been slow due partly to weakening property sentiments in the high-end segment in the Klang Valley. The project, undertaken on a 58% joint venture basis with a related company, Olympia Industries Berhad, has to date completed only one phase comprising 49 units of 4-storey villas with a gross development value of RM215.8 million. The construction of the first tower under KHD’s second phase has been delayed; as of to-date, only 23 units of 168 units (13.7% take-up) had been sold.

For financial year ended June 30, 2012 (FY2012), the plantation division, which has about 12,000 hectares of oil palm in the district of Labuk-Sugut and Tongod, Sabah, recorded a marginal decrease of 8.7% in revenue to RM51.1 million (FY2011: RM56.0 million). This is mainly attributable to lower fresh fruit bunches (FFB) output of 86,815 MT (FY2011: 88,139 MT) coupled with a decline in the average selling price of FFB to RM589 per MT compared to RM635 MT in the previous year. MARC notes the underperformance of its oil palm plantation relative to its peers: DutaLand’s average FFB yields of 10.81 tonnes/ha was much lower than the Sabah state average of 18.63 tonnes/ha and the national average of 18.47 tonnes/ha.     

For FY2012, DutaLand registered lower revenue of RM95.2 million (FY2011: RM115.5 million), primarily attributable to the lower contribution from its property development and plantation divisions. Revenue for the property division fell to RM44.1 million from RM59.4 million in the preceding fiscal year while revenue from the plantation division declined to RM51.1 million in FY2012 (FY2011: RM56 million). Overall, the group registered a pre-tax loss of RM4.1 million in FY2012 as compared to a pre-tax profit of RM3.5 million in the preceding year. In line with the group’s weaker operating performance, cash flow from operations has deteriorated to RM57.1 million (FY2011: RM101.4 million). Nonetheless, the group’s debt-to-equity ratio stood lower at 0.14 times as at FY2012 (FY2011: 0.17 times), which was mainly due to a decrease in the group’s total borrowings to RM121.6 million in FY2012 (FY2011: RM149.6 million).  

MARC notes that DutaLand repaid and cancelled RM45 million of financial instruments, which include RM7.5 million of RULS in FY2012. The final redemption for the RULS of RM13.1 million is due in April 2013. With its consolidated liquidity position remaining minimal at RM5.9 million (FY2011: RM11.8 million) in relation to short-term obligations of RM119.8 million as of FY2012, MARC expects DutaLand to accelerate asset disposals to meet its debt repayments.

Contacts:

Jasmine Kua, +603-2082 2280/ jasmine@marc.com.my;

Rajan Paramesran, +603-2082 2233/ rajan@marc.com.my.