MARC affirms A+IS rating for Sunsuria’s RM500m sukuk programme

• MARC said the rating affirmation incorporates Sunsuria’s property development approach, healthy overall take-up rates, and low inventory level.

KUALA LUMPUR (Sept 8): MARC Ratings has affirmed its rating of A+IS with a stable outlook for Sunsuria Bhd's RM500 million Islamic medium-term notes programme (sukuk wakalah). The outstanding amount under the programme stood at RM181 million as of August 2023.

MARC said the rating affirmation incorporates Sunsuria’s property development approach, healthy overall take-up rates, and low inventory level.

“The rating also factors in the group’s low-to-moderate leverage position and healthy liquidity position,” the rating agency said in a statement on Friday.

Meanwhile, moderating the rating is the prevailing challenging domestic property market outlook amid a rising cost environment, and execution risks associated with Sunsuria’s expansion into overseas markets as well as other business segments, it said.

According to MARC, the property developer’s total ongoing projects' gross development value (GDV) stood at RM2.2 billion as of March 2023. About 15% of that came from the 375-acre (151.76-hectare) flagship development of the Sunsuria City township in Salak Tinggi, Selangor.

“It recently launched Seni Residences with a GDV of RM108.1 million in Sunsuria City. Other ongoing developments comprise the Bangsar Hill Park project in Bangsar, Kuala Lumpur with a GDV of RM1 billion, and the Forum II project in Setia Alam, Selangor with a GDV of RM805.1 million,” MARC said.

MARC also noted that Sunsuria’s ongoing projects had recorded a take-up rate of 86.9%, and that its large unbilled sales of RM1 billion as of March 2023 provide earnings visibility through 2025.

In terms of inventory, the group saw a decline to RM67.2 million as of March 2023, from RM113.2 million in the previous year.

Meanwhile, the group's establishment of the new British International School — slated to commence intake in September 2024 —  and the Sunsuria Care Hub, which provides basic healthcare services around its anchor development of Xiamen University Malaysia, will further enhance the Sunsuria City township.

Besides Malaysia, Sunsuria expanded its presence in London last year to redevelop a two-storey commercial building into six residential units, to be launched for sale in September 2023.

"Although it has a modest GDV of around £3 million (RM15.7 million), the project has allowed the group to establish its footprint in the UK,'' it said.

It also noted that Sunsuria had, in March last year, acquired 0.3 acre of land in Melbourne for A$3 million (RM8.97 million) to be developed into residential units. The project, which has a GDV of about A$22 million, will be on a build-and-sell basis, and completed units are expected to be launched in 2026.

Sunsuria's revenue rose 12% year-on-year (y-o-y) to RM201.7 million for the first half ended March 31, 2023 (1HFY2023), supported by higher progress billings. However, operating profit was lower by 4.2% y-o-y at RM28.5 million — mainly due to higher construction cost.

Its borrowings rose to RM612.4 million as at 1HFY2023, from RM497.4 million at the end of FY2022, mainly for working capital. This translated into a debt-to-equity (D/E) ratio of 0.57 times and a net D/E ratio of 0.24 times.

"Its cash and bank balances of RM242 million (excluding the housing development account balance) and unutilised credit lines of RM208 million provide sufficient funding," added MARC.

Sunsuria shares settled half a sen or 0.96% lower at 51.5 sen on Friday, giving the group a market capitalisation of RM461.4 million. The counter has appreciated 60.94% so far this year.

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