MARC assigns AAIS/AA ratings to OSK unit sukuk

KUALA LUMPUR: MARC has assigned preliminary ratings of AAIS /AA to special purpose vehicle OSK Rated Bond Sdn Bhd’s (OSKRB) proposed sukuk murabahah/multi-currency medium-term notes programme (Sukuk/MCMTN) with a combined limit of up to RM2 billion.

“The ratings outlook is stable. The assigned ratings apply to ringgit-denominated sukuk/notes issued under the programme,” it said in a statement.

Wholly owned by OSK Holdings Bhd (OSK), OSKRB was set up to undertake the Sukuk/MCMTN programme, proceeds of which will be on-lent to the group. MARC has equalised the ratings of the issuance under the programme to OSK’s corporate credit rating based on the unconditional and irrevocable guarantee extended by the parent to the programme.

OSK is a non-operating investment holding company with key subsidiaries involved in property development and capital financing, and has a substantial stake in RHB Bank Berhad, a major domestic bank in the country.

“OSK’s AA corporate credit rating is driven by a wellestablished operational track record in its key businesses, a low leverage position and strong financial flexibility that partly stems from its 10.13 per cent stake in RHB Bank,” MARC stated.

“This stake, which has provided a substantial dividend income stream to the group in recent years and remains a strong source of liquidity, is a rating consideration.”

OSK’s property development is characterised by few and staggered launches, risk sharing through joint venture arrangements, large unbilled sales of RM1.3 billion, and low property inventory of RM16 million as at end-June 2020. It has an ongoing gross development value (GDV) of RM3.3 billion. This includes township developments Bandar Puteri Jaya in Sungai Petani and Iringan Bayu in Seremban, as well as joint developments Agile Mont Kiara in KL and the Melbourne Square (MSQ) in Melbourne, Australia, its first and only foreign property project.

“The domestic projects have achieved an overall take-up rate of 78 per cent while MSQ has a take-up rate of 77 per cent. The healthy response could be a ributed to the group’s property strategy of avoiding extensive launches, particularly in the current weak environment,”

OSK’s other key business is capital financing, through which it has built a loan portfolio of RM864.3 million by end-June 2020. Lending is on a relatively short-term basis (tenure ranges from two to 48 months) and is well collateralised.

The ratings outlook is stable. The assigned ratings apply to ringgitdenominated sukuk/notes issued under the programme.

MARC