Dec 31, 2012 -
MARC has affirmed its AAAID(bg)
and MARC-1ID(s) ratings on Horizon Hills Development Sdn Bhd’s (Horizon Hills)
Islamic Bank Guaranteed Medium Term Notes (IMTN) Programme of up to RM200
million and Islamic Commercial Papers (ICP) Programme of up to RM70 million
respectively. The ratings carry a stable outlook. Horizon Hills is
jointly-owned by UEM Land Berhad (UEM Land) and Gamuda Berhad (Gamuda).
The rating affirmation on the
IMTN Programme reflects MARC’s public information counterparty credit rating of
AAA/Stable on Public Bank Berhad (PBB) which has provided an irrevocable and
unconditional guarantee on the programme. The rating is premised on PBB’s
healthy asset quality, robust profitability and strong market position in
Malaysia as the third largest commercial bank. The affirmed rating on the ICP
programme reflects the credit strength of Horizon Hills’ shareholders, UEM Land
and Gamuda, both of which carry MARC’s short-term rating of MARC-1. UEM Land
and Gamuda have provided unconditional and irrevocable undertakings to meet any
financial obligation under the rated debt of up to RM280 million
proportionately. In addition, the shareholders have also provided a guarantee
to fund any cash flow deficit in the Horizon Hills project and in respect of
financial covenants pertaining to the rated notes of up to RM30 million.
Located within Nusajaya in
Iskandar Malaysia, the Horizon Hills development has progressed well since
beginning its launch in 2007, consistently meeting sales targets. As at August
31, 2012, ongoing projects registered an average 88% take-up rate. MARC
observes that the development has continued to elicit strong foreign interest,
in particular from Singapore, with foreign purchasers accounting for 43% of the
total to date. With a remaining 750 acres of the initial 1,033 acre site
(excluding the 18-hole golf course) still available for future developments,
MARC expects Horizon Hills to continue to launch projects in the medium- and
high-end segment.
As at August 2012, Horizon Hills
has launched a total of 1,807 mixed residential and commercial units with a
gross development value of RM1,292 million, and has earmarked the launch of
further projects with a GDV of RM488.1 million by 1H2013. Nonetheless,
increasing competition from nearby developments in Iskandar Malaysia could
weigh on its sales performance going forward. However, Horizon Hills’ unbilled
sales of RM364 million as at August 31, 2012 would provide earnings visibility
over the next two years.
For the half-year ending June
30, 2012 (1HFY2012), revenue and pre-tax profit grew strongly to RM146.3
million (1HFY2011: RM77.5 million) and RM45.5 million (1HFY2011: RM15.1
million) respectively. Correspondingly, the operating profit margin rose to
31.1% in 1HFY2012 (1HFY2011: 19.5%). The growth momentum is the result of
increased launches and strong take-up rates for Horizon Hills’ projects
launches. For FY2011, the company generated improved revenue of RM203.1 million
and pre-tax profit of RM47.1 million. Cash flow from operations increased to
RM67.4 million in 1HFY2012 (1HFY2011: RM18.3 million) due to the company’s
improved operating profit and cash inflow on trade receivables and other
receivables. Horizon Hills’ debt-to-equity (DE) ratio declined to 0.90 times as
at June 30, 2012 (FY2011: 1.11 times) due to the 14% increase in shareholders’
equity to RM277.3 million (FY2011: RM243.3 million), mainly from retained
earnings. The DE remains well within the covenanted ratio of 2.33 times.
The IMTN and ICP noteholders are
insulated from downside risks in relation to Horizon Hills’ credit profile by
virtue of the guarantee provided by PBB, Gamuda and UEM Land.
Contacts:
Nisha Fernandez, +603-2082 2269/
nisha@marc.com.my;
Jasmine Kua, +603-2082 2280/ jasmine@marc.com.my;
Rajan Paramesran, +603-2082
2233/ rajan@marc.com.my.
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