It said on Friday the enhanced rating reflected the irrevocable and unconditional financial guarantee extended by Danajamin Nasional Bhd (rated AAA/Stable/P1 by RAM).
However, it said that excluding the guarantee, Great Realty’s stand-alone credit profile is challenged by the company’s highly geared balance sheet.
“As at end-July 2017, its gearing ratio came in at 2.17 times (end-December 2016: 2.24 times),” it said.
RAM Rating said while Great Realty is expected to remain highly leveraged for the next few years, debts are likely to be progressively pared down with operating cashflow in the longer term.
On balance, the company’s heavy debt load was moderated by a still adequate funds from operations debt coverage of 0.12 times for 2016 and seven months to FY Dec 2017, which was anticipated to inch up to 0.13 times for the next few years.
Great Realty registered an interest coverage ratio of 2.22 times in 7M FY Dec 2017 (FY Dec 2016: 2.24 times), which is envisaged to remain below three times in the near future – these levels were deemed somewhat low.
“Great Realty is also vulnerable to considerable key-man risk, given that Datuk Ho Kiong Chan – the company’s founder and managing director – plays a crucial role in formulating most of its strategies and steering its operations.
“Great Realty further faces single-asset risk in view of its sole reliance on rental income from Aman Central (the mall) – its only asset – to service debt obligations under the MTN programme.
“That said, the mall’s performance has been robust in its first two years of operations,” it said.
RAM Ratings said that located strategically within the central business district of Alor Setar in Kedah, Aman Central’s fairly diverse tenant mix offers a holistic shopping and entertainment experience not found in any other mall in the state.
Since its opening, the mall has seen a commendable monthly average of more than one million visitors.
Also benefiting from the leasing expertise of the company’s shareholder, Belleview Sdn Bhd, Aman Central charted a strong average occupancy rate of 90% as at end-July 2017, with an average rental rate of RM4.77 per square foot – higher than some other malls in Kedah.
The ratings agency also pointed out while Aman Central has yet to complete its first tenancy renewal cycle – tenancies for 78% of the Mall’s net lettable area will expire in 2018 – “we expect its occupancy rate to stay solid in view of its strategic location and the paucity of prominent retails space in Alor Setar”.
Great Realty, which is a unit of Belleview, Great Realty was set up to develop and operate Aman Central, an eight-storey shopping mall in Alor Setar.
Privately owned by Ho, Belleview has almost 30 years of experience in property development, property management and property investment.
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