KUALA LUMPUR (Dec 3): Malaysia Rating Corporation Bhd (MARC) has assigned preliminary ratings of AAA and stable to Berjaya Land Bhd’s (BLand) proposed 10-year RM650 million guaranteed Medium-Term Notes (MTN) programme

In a statement today, MARC said it had assigned a rating of AAA(fg) for the RM500 million portion guaranteed by Danajamin Nasional Bhd, and AAA(bg) for the RM150 million guaranteed by OCBC Bank (Malaysia) Berhad (OCBC Malaysia).

"The assigned rating on the RM500 million portion reflects the unconditional and irrevocable financial guarantee provided by Danajamin which carries a financial insurer rating of AAA/stable from MARC," it said.

For the RM150 million portion, the agency said it reflected the credit strength of an unconditional and irrevocable guarantee by OCBC Malaysia, which is rated AAA/stable by MARC.

The rating agency noted that Berjaya Sports Toto Berhad (BToto) remained the key contributor to the group, accounting for 70.5% and 80% of consolidated revenue of RM5 billion and operating profit of RM701.9 million respectively in financial year 2014 (FY14).

"Nonetheless, given BLand's 40.8% stake in BToto, dividends from the gaming subsidiary have been relatively modest, amounting to RM78.2 million in FY2014," MARC said.

MARC noted that BToto's accounts were consolidated on the basis that the combined stake of BLand and two other related shareholders exceed the 50% threshold in BToto.

On BLand's domestic property development, the rating agency said the activities had been relatively modest despite the availability of a large land bank.

"The land bank is expected to increase pending the completion of the acquisition of 245 acres of Selangor Turf Club (STC) land in Sungai Besi, by a subsidiary of BLand, for RM640 million to be settled by cash and land swap," MARC said.

According to MARC, BLand is expected to carry out a mixed-development project with a gross development value (GDV) of about RM24 billion on the said land.

"BLand was able to achieve strong take-up rates for its recent launches, particularly in Bukit Jalil, despite the challenging conditions in the domestic property market.

"For its ongoing domestic residential and commercial developments, the group has a GDV of RM2.3 billion which will support the property division's performance in the near term," said MARC.

MARC, however, said BLand's foreign property development activities considerably outweighed domestic projects, in terms of size and gestation periods.

According to MARC, BLands has a total of RM62 billion in GDV of foreign ongoing projects, with development periods up to 2035.

MARC said BLand's clubs and recreation business remained weak while the performance of the hotels and resorts division was moderate and characterised by asset disposals and acquisitions.

It said BLand recognised a disposal gain of RM94.7 million in FY2014 from the sale of Berjaya Singapore Hotel.

"Excluding the one-off gain from the hotel disposal in FY2014, the group's consolidated pre-tax profit would have declined marginally by 4.6% to RM440.5 million, due to lower earnings contribution from its gaming division," it said.

MARC viewed the company as continuing to be dependant on refinancing, disposal of investments and/or repayment of advances by subsidiaries to meet its debt obligations.

"Notwithstanding BLand's standalone risk factors, noteholders are insulated from the downside risk related to the credit profile of BLand by the guarantees provided by Danajamin and OCBC.

"Any change in the supported ratings or rating outlook would be primarily driven by changes in the credit strength of the guarantors," it added.