MARC AFFIRMS RATING OF AA-ID ON SUNRISE BERHAD'S RM400 MILLION IMTN PROGRAMME

Jan 22, 2014 -
MARC has affirmed its rating of AA-ID on Sunrise Berhad’s (Sunrise) RM400 million Islamic Medium Term Notes (IMTN) Programme with a stable outlook. Sunrise’s rating is equalised to that of its parent, UEM Sunrise Berhad (UEM Sunrise), as MARC views Sunrise as a core subsidiary of UEM Sunrise on the basis of the high degree of operational integration between them, the strong strategic fit of the company with the group’s property development activities as well as a shared brand name. MARC has recently affirmed the rating of UEM Sunrise at AA-IS /MARC-1IS /stable.
Sunrise’s stand alone credit profile reflects its strong market position, in particular in the high-end residential development segment in Kuala Lumpur, its good near-term earnings visibility and moderate land bank size. Moderating these factors are the weakening sentiments in the residential segment on the back of the cumulative effects of cooling measures imposed on the property sector and the slowdown in the office segment due to looming oversupply. MARC notes that Sunrise had fewer launches in the Klang Valley in 2012 compared to prior years, launching only the second phase of Summer Suites development (office suites), and the second and third phases of the Arcoris project (SOHO and service apartments) with a combined gross development value (GDV) of RM949.8 million. Sunrise’s expected future billings from contracted sales (unbilled sales) of RM2.5 billion as at June 30, 2013 (1HFY2012: RM1.1 billion) will sustain earnings in the near- to medium-term.
Since its acquisition by UEM Sunrise in January 2011, Sunrise launched its first development, Teega, in Iskandar, Johor, where its parent has a significant presence as a developer and sizeable land owner. Consisting of condominiums, serviced apartments and office suites, Teega has a total GDV of RM1.3 billion and has achieved an average take-up rate of 80.8% since its launch in November 2012. MARC opines that the strong response is attributable to the positive demand trend for Iskandar projects.  Sunrise has also fully completed the construction of the 28 Mont’ Kiara project while its ongoing projects Quintet phase 1 and 2 in Vancouver, Canada, and the earlier phases of Summer Suites and Arcoris have achieved commendable take-up rates. Among its future developments are the RM1.59 billion mixed-development project in Bukit Jelutong, Shah Alam, which is jointly undertaken with Sime Darby Property Berhad, and the RM866.0 million condominium project in Mont’ Kiara (MK22).
For the financial year ended December 31, 2012 (FY2012), Sunrise registered strong revenue of RM802.6 million and a pre-tax profit of RM190.2 million (18MFY2011: RM1,252.9 million; RM272.5 million). However, for the six months ended June 30, 2013 (1HFY2013), Sunrise’s revenue and pre-tax profit weakened, registering a decline of 24.3% and 38.7% respectively to RM313.3 million and RM62.9 million from the previous corresponding period last year (1HFY2012: RM413.6 million; RM102.7 million). This was largely attributed to the fewer launches the company had undertaken in recent years and to the early stages of development for its newly launched projects. MARC notes Sunrise’s leverage position remains moderate at 0.63 times as at end-June 2013 (end-June 2012: 0.70 times). The company has total borrowings of RM765.3 million including the outstanding RM200 million IMTNs under the rated programme. Sunrise’s unrestricted cash of RM62.4 million and unutilised credit lines of RM269.1 million (excluding the unutilised RM200.0 million of the IMTN) affords the company strong financial flexibility. MARC also notes that Sunrise is able to rollover/refinance the upcoming scheduled rated debt repayment of RM100.0 million at end-January 2014 if necessary.
The stable rating outlook on Sunrise is in line with the outlook on UEM Sunrise’s rating. Any change in Sunrise’s rating is likely to be driven by changes in UEM Sunrise’s rating and/or change in expected support from its parent.
 
Contacts:
Jasmine Kua, 03-2082 2280/ jasmine@marc.com.my;
Taufiq Kamal, 03-2082 2251/ taufiq@marc.com.my.