Published on 17 Oct 2019.
RAM Ratings has reaffirmed the respective AAA, AA3 and A3 ratings of the RM250 mil of Sukuk Ijarah (listed below) under Purple Boulevard Berhad’s (the Issuer) RM450 million asset-backed Sukuk Ijarah Programme. We have also revised the outlook on the Class B and Class C Sukuk to positive from stable. The Sukuk Ijarah is collateralisation for Ampang Point Shopping Centre (Ampang Point or the Property) – a suburban neighbourhood mall in Ampang, Kuala Lumpur.
Amount of up to
Senior Class A
11 November 2022
10 May 2024
Senior Class B
13 November 2020
13 May 2022
Senior Class C
Guaranteed Class D
11 November 2022*
Subordinated Class E
The revision of the outlook on the respective sukuk classes reflects the potential upside to the Property’s net property income (NPI) upon the completion of planned asset enhancement initiatives (AEIs) and commencement of operations of a key new anchor tenant, TGV Cinemas. This is notwithstanding the expected redemption of the Class B and Class C Sukuk on their scheduled expected maturity in 2020. RAM has also taken into account potential cashflow interruption during AEI transition period. Based on our cashflow assessment, the Property’s cashflow will still be enough to meet the Issuer’s financial obligations under the transaction.
The reaffirmation of the Senior Class sukuk ratings is premised on the collateral support provided by the Property that remains commensurate with the assigned ratings. For now, our sustainable cashflow assumption and stressed capital valuation of the collateral stay unchanged. We will reassess the Property’s sustainable cashflow post-AEIs and when it is able to demonstrate a sustainable performance. Meanwhile, the reaffirmation of the guaranteed Class D Sukuk’s rating continues to reflect the credit standing of its guarantor, Danajamin Nasional Berhad, whose rating was reaffirmed at AAA/Stable on 4th July 2019.
For FY 2018 and 1H FY 2019, Ampang Point’s performance was stable with a NPI that was slightly above RAM’s sustainable cashflow assumption of RM21 mil per annum. Despite the challenging retail environment, the Property registered an improved average rental rate of RM7.21 psf (2018: RM7.07 psf) and lower expenses, owing to the management’s efforts to retain existing performing tenants and replace non-performing tenants by way of better rental reversions. Moving forward, the addition of TGV should further improve Ampang Point’s shopper traffic and eventually translate into higher rental revenues, albeit potentially introducing increased income volatility owing to tenants whose lease agreements are structured on percentage sales revenue. Planned AEIs, for which approval from respective authorities is pending, are estimated at a cost of RM27.5 mil and expected to take eight months up to a year to complete. The exercise will be fully funded by the Originators. To date, a total of RM2.98 mil has been dispensed for the Property’s upgrade, only RM785,981 of which had been reimbursed with funds from the MRA. The said factors add comfort in incentivising the Sponsor to continue to support the transaction.
Single-asset concentration risk remains a key factor moderating the ratings, as does tenant concentration risk, as the Property’s top five tenants made up 43.15% of its total net lettable area (NLA) and 20.45% of monthly gross rental income as at end-June 2019. In view of the addition of a cinema and a new anchor tenant which is anticipated to commence operations in the fourth quarter of 2019 in an occupied area of 22,000 sf, tenant concentration risk will stay high. The Property’s lease maturity profile is lumpy, with leases for a respective 32.47% and 49.94% of NLA due to expire in 2020 and 2021. Of this, a respective 15.58% and 38.39% of NLA is occupied by anchor tenants. Nevertheless, given that they have been anchor tenants since Ampang Point’s inception, we envisage minimal renewal risk.
Teoh Tze Yit
(603) 3385 2531
(603) 3385 2577
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Ratings on Purple Boulevard Berhad