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RAM Ratings affirms IJM Land’s A2(s)/Stable issue rating
Published on 04 Nov 2024.
RAM Ratings has affirmed the A2(s)/Stable rating of IJM Land Berhad’s (the Company) RM2.0 bil Perpetual Sukuk Programme. The Perpetual Sukuk comes with a subordinated guarantee from the Company’s parent, IJM Corporation Berhad (IJM Corp or the Group), whose debt securities are rated AA3/Stable by RAM.
The sukuk rating is reflective of the unconditional and irrevocable subordinated guarantee extended by IJM Corp. The two-notch differential from the Group’s rating indicates the risk of deferrable profit distributions and the sukukholders’ deeply subordinated rights to claims in the event of insolvency. The (s) modifier reflects the purchase undertaking by IJM Land to acquire the sukukholders’ interest in the relevant Musharakah Venture from the Sukuk Trustee at the agreed exercise price. IJM Land is the property development arm of IJM Corp. Demonstrated financial backing from IJM Corp through consistent unsecured advances underscores IJM Land’s strategic importance to IJM Corp.
IJM Land’s revenue grew to RM1.9 bil in FY Mar 2024 (FY Mar 2023: RM1.5 bil) due to the higher work progress of ongoing projects and strong property sales. That said, the Company’s operating profit before depreciation, interest and tax margin narrowed to 17.1% (FY Mar 2023: 26.8%) due to a higher write-down in inventories. Unbilled sales stood at a healthy RM2.6 bil as at end-March 2024 (down from RM3.0 bil as at end-March 2023), driven by solid take-up rates for the Company’s ongoing projects. This should provide revenue visibility and support its near-term financial performance.
Lower debt levels saw IJM Land’s gearing improve to 0.47 times as at end of fiscal 2024 from 0.53 times a year ago. Its debt servicing ability remained steady, with funds from operations debt coverage (FFODC) of 0.11 times (fiscal 2023: 0.10 times). Excluding the unsecured advances from IJM Corp (no fixed payment date) and other intercompany borrowings –collectively accounting for 61% of total debts - IJM Land’s FFODC and gearing would be a better 0.27 times and 0.18 times, respectively.
IJM Land’s property business is cyclical, as sales and financial performance typically correlate with the general health of the economy. Residential transaction value and volume for 2023 increased 7.1% and 3.0% y-o-y, respectively, in-line with Malaysia’s 3.7% GDP expansion during the year. The economic momentum was led by resilient domestic demand and accommodative government policies for home purchases and ownership amid a weaker external environment. Property market growth in 2024 is expected to continue at a measured pace premised on continued government support and robust domestic growth prospects.
Analytical contacts
Johan Faizul
(603) 3385 2518
johan@ram.com.my
Karin Koh, CFA
(603) 3385 2508
karin@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
© Copyright 2024 by RAM Rating Services Berhad
