Published on 16 Oct 2019.
Exsim Capital Resources Berhad (Exsim Capital or the Issuer) had successfully issued RM290 mil of Tranche 1 IMTN under its RM2 bil Sukuk Musharakah Programme on 30 January 2019. The Tranche 1 IMTN is backed by sale and purchase agreements (SPAs) signed with buyers for the Nidoz Residences (Nidoz) and D’Nuri Residences (D’Nuri) development projects (collectively, the Projects) in Desa Petaling, Kuala Lumpur. Future receipts under these agreements are used to fund remaining construction costs of the projects, as well as to meet the Issuer’s fees, expenses and obligations in respect of the Tranche 1 IMTN. Concurrently, Exsim Capital had also undertaken the issuance of an unrated RM130 million Sukuk Murabahah ICP facility (Tranche 1 ICP) as a contingent line to cover shortfalls in profit payments and senior expenses relating to the Tranche 1 IMTN, construction cost overruns and/or timing mismatches between the projects’ development costs and expected progress payments. Exsim Capital is a subsidiary and special-purpose vehicle of Exsim Development Sdn Bhd.
Since financial close, monthly construction progress reports submitted have noted some delay from initial expectations, although still largely within RAM’s sensitivity. Specifically, the developer had granted one of Nidoz’s contractors a two-month extension of time (EOT), given its inability to catch up on planned construction progress. This was in spite of mitigating remedial work initiated. While this had pushed back the targeted completion date for two of Nidoz’s towers to March 2019, we do not view the delay as a material concern at this point as there is still a three-month time buffer from the legal vacant possession (VP) date for Nidoz. The two other contractors are largely on track to meet their targeted completion dates. Based on the Independent Project Certifier’s (IPC) latest quarterly report dated 5 August 2019 and the developer’s expectations, construction progress is on schedule to meet the respective project VP dates. Notably, construction works for all five towers have reached the roof, with largely internal and common facility works left to be done.
The developer had sold three units at Nidoz since financial close, leaving two remaining unsold units. The number of buyers who had terminated/defaulted on their SPAs was minimal at 0.42%, well below RAM’s expectations. The average discount for resold units was also better than that assumed. There were no defaults on any of the SPAs signed for D’Nuri.
From the working capital requirement perspective, we highlight that only RM10 million out of the Tranche 1 ICP limit has been drawn to date – lower than the sum in our sensitised scenario. The RM10 million of ICP was fully repaid in June 2019 using cash in the HDA accounts. Given an average monthly cashflow from progress billings of RM30 million going forward, we do not anticipate any immediate or large draws on the ICP. Please refer to our transaction update report published on 16 October 2019 for further details.
Lim Chern Yit
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Ratings on Exsim Capital Resources Berhad