Nov 19, 2012 -
MARC has affirmed the rating of
Olympia Industries Berhad’s (Olympia) outstanding RM12,061,406 nominal value
Redeemable Unsecured Loan Stocks (RULS) at B+ with a stable outlook. The rating
incorporates the slow progress of the group’s sole property project, the
73-acre Kenny Heights Development (KHD) in Sri Hartamas in Kuala Lumpur, its
weak financial performance and strained liquidity position that has been
supported by asset disposals. The rating also considers the modest but somewhat
stable income from Olympia’s gaming subsidiary and rental income from its
Menara Olympia building.
MARC views the slow development
of KHD, which is being undertaken jointly with related company DutaLand Berhad
on a 42:58 basis, has weighed on Olympia’s performance. Comprising a high-end
mixed development, only one phase, consisting of 49 units of four-storey villas
with a gross development value of RM215.8 million, was completed and handed
over in April 2011. The construction of the second phase of the KHD project
comprising four high-end condominium towers has been delayed. MARC notes
that the first tower under the second phase had registered a weak 13.7% take-up
rate for its 168 units, partly reflecting the weak market sentiments in the
high-end residential segment in the Klang Valley.
Olympia’s gaming activities,
which are carried out solely in Sabah, registered revenue of RM151.1 million
for financial year ending June 30, 2012 (FY2012) (FY2011: RM152 million) and
pre-tax profit of RM7.3 million (FY2011: RM7.0 million). Its sole investment property,
the 34-storey Menara Olympia with total lettable area of 453,160 sq ft,
improved its occupancy rate to 78% in FY2012 (FY2011: 74%) with an average
rental rate of RM4.91psf (FY2011: RM4.80psf). Overall, the group’s rental
income stood at RM21.0 million in FY2012, marginally higher than RM18.9 million
in the preceding year.
Notwithstanding the contribution
from its investment property and gaming operations, Olympia recorded a pre-tax
loss of RM27.0 million in FY2012 (FY2011: pre-tax profit RM9.1 million), due
mainly to losses incurred by its property development and financial services
division (Jupiter Securities Sdn Bhd) as well as increased financing cost of
RM26.5 million (FY2011: RM15.2 million). Cash flow from operations (CFO) rose
to RM93.1 million, supported by proceeds from the sale of 15.3 acres of land in
Johor for RM80.0 million in the preceding year. MARC notes that Olympia’s
liquidity position has continued to be supported by disposal of marketable
securities and land parcels. For FY2012, Olympia met payment of about RM268.0
million under the restructured debt obligations from borrowings of RM150.8
million and internally generated funds.
Given the group’s limited cash
flow generation, MARC views continued asset sales to be necessary to meet its
upcoming debt obligations. As at end-FY2012, the group has total unencumbered
assets valued at RM60.4 million excluding its portion of the KHD land while its
cash stood at RM33.5 million against short-term obligations of RM89.3 million
including the final redemption amount of RM12.1 million in April 2013.
Contacts:
Jasmine Kua, +603-2082 2280/ jasmine@marc.com.my;
Rajan Paramesran, +603-2082
2233/ rajan@marc.com.my.
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