Published on 17 Nov 2023.
RAM Ratings has upgraded Exsim Capital Resources Berhad’s (Exsim Capital or the Issuer) RM323 mil Tranche 2 IMTN to AA2 from AA3, and revised outlook on the rating to positive from stable. We have also affirmed the AA3/Stable rating of the Issuer’s RM300 mil Tranche 3 IMTN. Both issuances are under Exsim Capital’s RM2 bil Sukuk Musharakah Programme.
The rating upgrade for Tranche 2 IMTN reflects the advanced construction progress of the underlying projects – D’Quince Residences and D’Vervain Residences. Vacant possession (VP) of the units is on track for delivery to purchasers by 1Q 2024, well ahead of the original legal VP dates in August/September 2024. The Projects’ physical works have been completed up to rooftop level, with mainly internal works remaining as at 23 October 2023, thereby materially moderating construction risk. The positive outlook reflects our expectation that the Tranche 2 IMTN will become fully cash-backed upon delivery of VP of the units to purchasers by 1Q 2024, which is less than six months away.
The affirmation of the Tranche 3 IMTN rating is premised on the satisfactory construction progress of D’Erica Residences and the transaction’s adequate liquidity. While further delays are anticipated as construction activity is limited by terrain clearing activities using rock bombing near the project site, the available time buffer for project completion is viewed to be adequate. The interruption is expected to last until 1Q 2024, likely necessitating the provision of a further extension of time (EOT) of up to three months, to the contractor. Notwithstanding that, D’Erica’s original legal Certificate of Completion and Compliance (CCC)/VP date of 23 December 2024 continues to provide a sufficient time buffer against the revised legal Certificate of Practical Completion (CPC) date and revised target CCC/VP date of 2 June 2024 and 31 July 2024, respectively.
Table 1: Project progress and milestones following latest EOT granted to contractor
The liquidity position of both Tranches 2 and 3 remains underpinned by healthy buyer profiles and the respective Islamic Commercial Papers (ICP) facilities. There have been no buyer defaults from a failure to meet obligations under sales and purchase agreements for the two tranches since our transaction updates in July 2023 (click here). As at end-September 2023, D’Quince and D’Vervain were fully sold while D’Erica had only one unsold unit. Going forward, we expect minimal drawdown of the ICP facilities as all projects have begun generating positive monthly project net cash flows. No construction cost overruns have been noted so far, given the fixed-price lump-sum contracts.
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