Monday, September 30, 2013

Thailand targets new tourism source markets - OBG

Thailand targets new tourism source markets

With one of the world’s strongest tourist industries, Thailand is now working to build on its international reputation, developing high-earning segments and broadening its market reach.
The country is aiming to generate a record Bt2trn ($63.9bn) in revenue from foreign and domestic tourists in 2014, the Tourism Authority of Thailand (TAT) announced in July. The government has set a target of attracting more than 28m foreign visitors next year, ... Read more.

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MARC today has downgraded its rating on Perwaja Steel Sdn Bhd’s (Perwaja) RM400.0 million Murabahah Medium Term Notes (MMTN) programme to DID from CID.

Sep 27, 2013 -
MARC today has downgraded its rating on Perwaja Steel Sdn Bhd’s (Perwaja) RM400.0 million Murabahah Medium Term Notes (MMTN) programme to DID from CID. The rating agency has also removed Perwaja’s rating from MARCWatch Negative where it has been placed since April 17, 2013.
The rating actions follow Perwaja’s failure to meet its repayment of RM50.0 million MMTN due on September 25, 2013. No event of default has been declared and the rating will remain at DID until the outstanding notes are redeemed, restructured or the rating is withdrawn at the request of the issuer. MARC notes that the MMTN noteholders have granted extension of the repayment to November 29, 2013. The agency believes the likelihood of further payment extensions is high in light of the company’s pending financial restructuring.
Following the downgrade, MARC will no longer conduct any rating surveillance on Perwaja’s rating.
Ngiam Tee Wei, +603-2082 2268/;
Taufiq Kamal, +603-2082 2251/

MARC has affirmed its AAAID/MARC-1ID and AAAIS ratings on Putrajaya Holdings Sdn Bhd’s (PJH) Islamic debt issuances

Sep 27, 2013 -
MARC has affirmed its AAAID/MARC-1ID and AAAIS ratings on Putrajaya Holdings Sdn Bhd’s (PJH) Islamic debt issuances as follows:-
     (i)   RM3.0 billion Sukuk Musharakah Programme (due 2032)
     (ii)  RM1.5 billion Sukuk Musharakah Medium Term Notes (MTN) Programme (due 2033)
     (iii) RM1.5 billion Murabahah Notes Issuance Facility (MUNIF) (due 2015)
     (iv) RM2.2 billion Murabahah Medium Term Notes (MMTN) Programme (due 2021) 

The outlook for all the ratings is stable. The ratings are premised on PJH’s strong financial profile derived from stable and predictable rental income streams received from the government for the sublease of government buildings in accordance with the build-lease-transfer concession agreement. While sublease rentals are not captured into designated accounts to meet profit and principal payments for (i), (ii) and (iii), PJH has provided negative pledges on identified government buildings for the respective programmes and facility. In respect of (iv), sublease rentals from identified government buildings are assigned to service the notes under the programme. MARC also notes that the MMTN programme has benefited from additional assignments of sublease rentals which had earlier been assigned to other facilities that were redeemed during the year. Overall, MARC considers the lease rentals from the government buildings to be sufficient to cover the repayments under the rated programmes and facility.
The rating also incorporates PJH’s role as master developer and its significant operating track record in the development of the federal government administrative capital of Putrajaya. PJH handed over 35.44 million sq ft of government buildings and the third phase of government quarters to the government in 2011 and 2012 respectively, and is currently constructing about 7.44 million sq ft of government buildings. In addition, the rating agency views the strength of PJH’s major shareholders, namely Petroliam Nasional Berhad (Petronas) through KLCC Holdings Sdn Bhd and Khazanah Nasional Berhad (Khazanah), as a positive rating consideration. Notwithstanding these factors, MARC observes PJH’s gradual shift in its business risk profile as the group undertakes more residential and commercial projects to further develop Putrajaya in line with the master plan. Accordingly, the group has steadily increased its property launches since 2011 for which MARC has observed strong take-up rates for the majority of its projects. Nonetheless, given the moderating outlook for the property sector, the group may encounter challenges to sustain strong take-up rates for its future launches. As of end-June 2013, PJH’s gross development value for its residential and commercial properties stood at RM1.48 billion.
For financial year ending December 31, 2012 (FY2012), PJH’s revenue grew marginally by 2.3% to RM1.8 billion from the annualised revenue of RM1.7 billion in the preceding year, mainly on account of higher lease rentals of RM1.4 billion received during the year. Lease rentals accounted for 77.2% of revenue in FY2012 (9MFY2011: 71.6%).  Contract revenue continue to moderate, registering RM85.0 million in FY2012 (9MFY2011: RM84.5 million) in line with government-related construction works reaching the tail-end stages. The operating profit margin remains strong at 56.5% in FY2012 (9MFY2011: 47.6%). MARC views the contribution from stable lease rentals to provide the group with sustainable revenue, supported by sale of land and property development. For the first half of financial year ended December 31, 2013 (1HFY2013), PJH’s revenue increased marginally by 6.1% to RM872.3 million (1HFY2012: RM822.3 million) due largely to higher sales of residential properties. However, the group’s operating profit margin fell slightly to 55.83% during the period (1HFY2012: 58.5%) due mainly to the increase in cost of sales and operating costs.

The group recorded strong operating cash flow (CFO) of RM1.11 billion in FY2012 (9MFY2011: RM859.1 million) while free cash flow and CFO interest coverage ratio stood higher at RM827.2 million and 3.96% respectively (9MFY2011: RM664.5 million; 3.62%). Meanwhile, PJH’s gearing level declined to 1.01 times in FY2012 (9MFY2011: 1.13 times) as it pared down its debt obligations to RM5.46 billion in FY2012 (9MFY2011: RM5.62 billion). MARC also notes that PJH has met the final redemption of its RM570 million Al-Bai Bithaman Ajil (BBA) bonds and RM850 million BBA bonds in March and July 2013 respectively as well as early redeemed its RM850 million BBA at end-July 2013. The respective lease rentals which were initially assigned to meet the redemption of the aforementioned facilities have been earmarked to meet PJH’s remaining unsecured and secured debt facilities.
The rating agency notes the high working capital requirement for PJH’s construction and property development activities in the medium term would increase its reliance on external funding. The group is also in the process of obtaining financing for projects at the subsidiaries’ level, which includes the construction of the MITI office tower by its wholly-owned subsidiary, Putrajaya Management Sdn Bhd. The project will be funded through a RM370 million IMTN Programme which is expected to increase the group’s debt-to-equity (DE) ratio to 1.08 times. MARC notes that DE remains well within the covenanted gearing ratio of 4.0 times.  PJH has strong financial flexibility which stems from unutilised credit line of approximately RM3.44 billion comprising RM315.0 million of Murabahah MTN, RM2.2 billion of Sukuk Musharakah and RM925.7 million of revolving credit facilities as at end June, 2013.
The stable ratings outlook assumes that PJH’s credit metrics with respect to its cash flow generation and debt service coverage would remain consistent with the assigned ratings in the near to intermediate term.
Jasmine Kua, +603-2082 2280/
Rajan Paramesran, +603-2082 2233/

RAM Ratings has reaffirmed the AA2/Stable/- rating of Development Bank of Kazakhstan Joint-Stock Company’s (DBK or the Bank) Sukuk Murabahah Programme of up to RM1.5 billion.

Published on 27 September 2013
RAM Ratings has reaffirmed the AA2/Stable/- rating of Development Bank of Kazakhstan Joint-Stock Company’s (DBK or the Bank) Sukuk Murabahah Programme of up to RM1.5 billion. The rating reflects the strong support that DBK enjoys from the Government of Kazakhstan (GOK or the Government).
As a development financial institution, the Bank plays a strategic role in facilitating the GOK’s goal of economic diversification, given that the country’s economy is highly dependent on the oil and gas sector. The GOK has been supportive of DBK’s operations with capital infusions and the provision of credit lines. On 4 June 2013, the trust management of the Bank, which is 100% owned by the GOK, via its sovereign wealth fund, Samruk Kazyna, was transferred to Baiterek JSC, another entity wholly-owned by the government. Accordingly, we expect the level of government support for DBK to remain high. 
Given DBK’s public-policy role, a social-development agenda is embedded in some of its credits, which may entail a higher level of credit risk. As at end-June 2013, about 45.4% (or KZT228 billion) of the Bank’s gross loans remained impaired. We note that the Bank has plans to reduce its gross impaired loans (GILs) (through the sale of GILs to the Investment Fund of Kazakhstan or a loan restructuring exercise), which may reduce its GIL ratio to below 20%.
Meanwhile, DBK remains heavily reliant on wholesale borrowings to match its loan assets which generally have longer tenures. This exposes the Bank to refinancing risk, which however is not currently viewed as a major threat. Under RAM’s stress test, DBK’s capitalisation provides a sufficient buffer against credit losses. As at end-June 2013, its tier-1 risk-weighted capital-adequacy ratio stood at 14.7%.
Media contact
Chew Wei Li
603 7628 1025

More banks opt for Sukuk as a means of raising capital - IFN

Daily Cover
GLOBAL: Over the last two weeks, a number of major banks have come to the market stating their intentions to issue Sukuk for capital raising purposes. The banks, spread over various markets including Turkey, Europe and the Middle East, are continuing a trend from last year which saw significant issuances from Abu Dhabi Islamic Bank, with its US$1 billion Tier-1 perpetual Sukuk, Qatar Islamic Bank which issued US$750 million in Sukuk and Saudi Hollandi Bank with its US$373 million domestically-placed Sukuk.
The most recent announcement this week came from Abu Dhabi-based Al Hilal Bank which intends to sell US$500 million-worth of Sukuk as part of its US$2.5 billion bond program. Other banks which have made similar announcements include Albaraka Turk Katilim Bankasi which is looking to issue Sukuk worth at least US$200 million before the end of this year or early next year, and Bank Asya with a TRY125 million (US$61.78 million) issuance in the fourth quarter. Qatar Central Bank also closed two Sukuk issuances this week with maturities of five years, totaling to QAR1 billion (US$274.46 million); while the most interesting deal to be announced so far is perhaps the upcoming Sukuk by one of the Eurozone’s largest banking entities, Societe Generale, which will launch a RM1 billion (US$302.69 million) Sukuk by the end of this year — making it the first French bank to issue in Malaysia.
It is evident, from the spate of banks coming to the Islamic capital market that capital raising exercises are ramping up as part of the agenda to fulfill Basel III requirements. However, it also begs the question of why would banks choose to issue Sukuk over other usual funding sources such as Commodity Murabahah or using the bank’s own assets or financing portfolio as a means of raising capital. Speaking to Islamic Finance news, a Malaysia-based lawyer familiar with structuring Sukuk for banks looking to increase their capital, said: “The main reason banks issue Sukuk for capital raising is to gain a certain profile; and they are usually looking to signal something to the market such as the ability to obtain liquidity from that specific market. Banks such as Societe Generale for example, has chosen Malaysia as the jurisdiction to issue because the Malaysian market is generally more active in terms of trading compared to the Middle East markets in which investors usually hold the paper to maturity.”
“The assets have to satisfy certain capital requirements and are usually meant for Tier-2 capital. Based on the upcoming Basel III requirements, banks are only allowed to derive funds from certain sources, and have to fulfill requirements such as being low risk, guarantee a certain level of returns, and pay out certain forms of redemption over a certain period. This however depends on central banks across different jurisdictions. In Malaysia for instance, Basel III is already embedded in the capital requirements for banks in Malaysia,” he added.
Other banks that have announced their intentions to issue Sukuk this year but have not revealed a definitive timeline or amount as yet include Barwa Bank in Qatar, Russia-based VTB Bank, Qatar Islamic Bank and Al Baraka Islamic Bank.

Sunday, September 29, 2013

Al Salam Bank invests in Saudi Arabia’s education sector - IFN

Daily Cover
SAUDI ARABIA: In a filing to the Bahrain Bourse, Shariah compliant Al Salam Bank announced its acquisition of an equity stake in Riyadh-based Education Experts Company (EEC), one of the fastest-growing education institutions in the kingdom, as part of an increased focus by the Bahrain-based Islamic lender on the Saudi Arabian market.
Commenting on the transaction, Talal Al Mulla, the bank’s chief investment officer, noted that the acquisition is the first of its kind. Expressing his confidence in the acquisition, he said: “The bank’s partnership with EEC would result in consummating many opportunities in the region with acceptable risk-adjusted returns to Al Salam and its investor base.” Yousif Abdulla Taqi, the director and CEO of Al Salam, further stated that the Saudi government has demonstrated its support towards education over the last five decades, having allocated a substantial amount of the kingdom’s annual budget for the sector.
There are currently a total of 34,749 schools, 24 universities and 508 affiliated education institutions in Saudi Arabia. The Education Ministry placed in motion a 10-year strategic plan in 2004, with SAR204 billion (US$54.38 billion) currently put towards the sector; an increase from SAR105 billion (US$27.99 billion) in 2008.
Established in 2011, EEC is a national company with several subsidiaries that provide educational training, research and counseling for individuals and institutions. The company also manages training facilities as well as organizes conferences and seminars for educational purposes.
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