RAM Ratings has assigned an AA3/stable rating to IJM Corporation Berhad's (the Group) proposed sukuk of up to RM3 billion. The rating is anchored by the diverse and strong market positions of the Group's core businesses (including construction, property development, plantation, industrial products and infrastructure assets), as well as its healthy financial profile.
The diversity of IJM's core businesses and their tangible market positions have allowed it to emerge relatively unscathed from market downturns. In fact, the Group's profit margins have been improving in the last few years. Going forward, earnings visibility remains encouraging given its strong unbilled property sales (of RM2.0 billion as at end-December 2013), the bright prospects for the replenishment of its construction order book via the West Coast Expressway (WCE) construction works and the upgrading of Kuantan Port, the predictable cashflow from its concession assets, and the expectation that its industry division will ride on the generally positive outlook for the construction sector. Nonetheless, the plantation division may experience some moderation in its profitability as CPO prices remain under pressure, compounded by the high costs of the Group's young Indonesian estates and mill.
Despite a sizeable debt load of RM5.71 billion, the Group's capital structure is considered healthy, with a net gearing ratio of 0.50 times as at end-December 2013. Its debt-servicing ability has also remained adequate, with an FFODC ratio of 0.16 times; its additional external borrowings are expected to be minimal over the next 2 years. Meanwhile, IJM's sizeable undeveloped land bank and unutilised banking lines accord it strong level of financial flexibility.
On the other hand, the rating is moderated by the Group's equity commitments and potential contingent liabilities that may arise from seeing the WCE project through to completion (IJM ultimately owns 40% of the concession company). The scale of the WCE project will cause lumpiness in the Group's construction order book and exacerbate project-execution risk given its sheer size (estimated at RM5 billion).
Media contact
Tan Han Nee
(603) 7628 1023
Hannee@ram.com.my
© Press Release 2014
