30 October 2014

Symphony Life’s standalone credit profile weakens on lack of new projects

  30 October 2014

KUALA LUMPUR: Mid-sized property developer Symphony Life Bhd’s standalone credit profile has weakened partly due to a decrease in property projects undertaken recently, says Malaysian Rating Corp (MARC).

The rating agency said on Wednesday Symphony Life has fairly diverse property projects mainly in Kedah and the Klang Valley. However, it did not have any launches between January 2013 and June 2014.

MARC said the launches were hindered mainly by delays in obtaining approvals, re-planning efforts for existing developments and ascertaining low-cost components in some projects.

Symphony Life’s unbilled sales fell to RM175mil as at end-June 2014 from RM477.7mil a year ago, “reducing the company’s near-term earnings visibility”, said the ratings agency.

The ongoing projects have a gross development value (GDV) of RM727.9mil as at end-June 2014, consisting of mainly residential developments in the Klang Valley.

MARC noted the group’s medium-cost serviced apartment project in Taman Tasik Prima, Puchong, had recorded full take-up rate, although sales of units in the high-end residential segment in Ulu Kelang and commercial segment in Senawang were lacklustre.

The group launched a small project in Taman Tasik Prima, Puchong, with a gross development value (GDV) of RM120mil in September 2014. It plans launches in the upscale Mont Kiara and Kuala Lumpur City Centre (KLCC) vicinity over the near to intermediate term.

“The prevailing challenging property market conditions, particularly for the high-end residential segment, could weigh on sales performance in the Mont Kiara and KLCC areas, although the group anticipates positive response based on registration of interest,” MARC said.

The group has a fairly large undeveloped landbank of 420.1 acres in Bandar Amanjaya and 419.0 acres in Sungai Long, Cheras, both of which have been largely earmarked for affordable and medium-cost property projects.

These projects are less vulnerable to property market cycles. Developments in Sungai Long had been put on hold due to potential compulsory acquisition of land parcels. Following the government’s recent decision not to proceed with the acquisition, the group has commenced plans for developments in the area.

Symphony Life has also proposed to acquire a 2.95-acre land parcel in Bandar Sunway, Selangor at RM58.2mil, or about RM452.90 per square foot for future medium- to high-cost developments.

For the financial year ended March 31, 2014 (FY2014), revenue fell to RM391.2mil (FY2013: RM406.9mil). However, pre-tax profit rose 23.1% to RM64.4mil (FY2013: RM52.3mil, after excluding a one-off gain on land disposal) on the back of lower operating costs and higher interest income.

The group recorded stronger cash flow from operations of RM46.1mil (FY2013: negative RM73.4mil) due to lower land costs and higher cash collections of progress billings from its ongoing and recently completed projects.

For 1QFY2015, the group’s liquidity position remained moderate with cash balance of RM132.9mil against short-term debt of RM136.7mil (FY2014: RM146mil; RM109.1mil).

Total borrowings of RM325.9mil as at end-1QFY2015 remained elevated relative to operations, although the debt-to-equity ratio improved marginally to 0.57 times (FY2013: 0.63 times) on a higher equity base of RM576.4mil.

MARC affirmed its rating of AAAIS(fg) on Symphony Life’s RM230mil seven-year Islamic medium-term notes (IMTN) programme with a stable outlook.

“The affirmed rating and outlook are based on the unconditional and irrevocable financial guarantee provided by Danajamin Nasional Bhd, which carries MARC’s financial strength rating of AAA/stable.

“The outstanding amount under the IMTN programme stands at RM150mil to date, with the first repayment of RM20mil due only in November 2017. The group has sufficient financial flexibility given its unutilised credit lines of RM170.4mil as at end-June 2014, including the RM80mil undrawn amount under the rated programme.

“As the ratings and outlook hinge on the guarantee provided by Danajamin, any changes to Symphony Life’s rating would be driven by an underlying change in Danajamin’s credit strength,” said MARC.



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