RAM Ratings reaffirms PKNS’ ICP, IMTN ratings

KUALA LUMPUR: RAM Ratings Services Bhd has reaffirmed the AA3 /Stable/P1 ratings of the Selangor State Development Corporation’s (PKNS) RM300 million Islamic Commercial Papers (ICP) Programme and RM1.7 billion Islamic Medium Term Notes (IMTN) Programme, with a combined limit of RM1.7 billion.

RAM Ratings in a statement yesterday said the reaffirmation reflected its view that PKNS would maintain its sturdy balance sheet and gradually restore debt coverage on the back of improving property sales.

“PKNS also enjoys extraordinary support from the Selangor state government.

“In contrast to private developers, PKNS plays an important public policy role and is tasked with spearheading socio-economic growth in the state, particularly in providing affordablehomesandestablishing townships to catalyse lessdeveloped areas,” it said.

It added that PKNS’ importance is also underlined by state and federal government representation on its board of directors. However, it said PKNS registered a very weak debt coverage, mainly attributable to lacklustre property sales in the preceding years.

Sales were hampered by the slow take-up of its pricier projects amid the soft property market, as well as a low loan approval rate among buyers and heightened competition in the low- cost segment.

Nevertheless, it said the agency’s property sales had improved starting financial year 2016 and is expected to gradually translate into progress billings and cash flows in subsequent years, provided the operating profit margin does not deteriorate further.

A meaningful recovery in debt coverage is only likely in financial year 2019.

RAM Ratings said in view of the delicate task of balancing its commercial and social obligations, PKNS’ ability to determine its property mix and pricing is limited by the public policy role and has to proceed with affordable housing projects, despite soft market conditions or economic downturns, to which buyers of mass-market homes are sensitive. — Bernama