Fitch Ratings has affirmed
The Outlook is Stable.
The rating is driven by BSD's position as one of
Key Rating Drivers
Steady Contracted Sales: We expect BSD's attributable contracted sales - which excludes the share of minority interests and land plot sales to joint ventures (JVs) - to remain steady at around
Nevertheless, demand from first-time homebuyers and owner-occupiers should remain healthy, driven by landed homes priced at or below
Foreign JVs Boost Appeal: Contracted sales from BSD's key JVs with foreign partners should remain healthy at around 20% of the mix, supported by the appeal of BSD's mature township BSD City, its improving connectivity, and the limited supply of similar premium offerings ranging from
Moderating Cash Flow, Low Leverage: Fitch expects BSD's cash collections from property sales to moderate in the next 12-18 months from multi-year highs seen in the last two years. This is because the surge in collections, which followed the relaxation of mortgage loan disbursement rules at end-2020, will normalise. Construction cost inflation and capex of around
Modest Non-Development Income: We expect BSD's non-development revenue to rise to around 15% in the next two years, from an estimated 10% in 2022. The rise is underpinned by a gradual improvement in rental income from its portfolio of offices, as workers return amid an apparent tapering off of pandemic-era telecommuting. Non-development revenue will also stem from rising toll-road income, as BSD owns the toll-road concession. Up to 10km of the toll road will be completed in the project's second phase in 2023, and should boost usage. The first 5km was operational in
Large,
Notched up from Weaker Parent: BSD's rating is notched up from that of its weaker parent
Furthermore, BSD raises its non-equity funding independently of SML, which allows for 'Porous' access and control along with the presence of significant minority shareholders, regional partners via its joint ventures and functional board separation.
Derivation Summary
BSD's 'BB-' rating may be compared with that of
Pakuwon is one of
BSD is rated at the same level as CTRA to reflect their similar homebuilding scale in terms of annual attributable presales, record of maintaining low leverage and solid liquidity. CTRA's property business is more geographically diversified than BSD's, given the latter's focus within its BSD City township. However, BSD City is more established than its peers' townships, with a stronger record of sustained sales.
BSD also has a larger land bank than CTRA, which has given it the flexibility to sell land to regional property developers for collaboration, raising the appeal of its township and boosting financial flexibility. Both issuers have portfolios of mostly small commercial properties, mainly in office and retail, that provide a degree of cash flow diversification.
BSD is rated two notches higher than BIM Land on account of BSD's stronger business profile with exposure mainly to residential development cash flow, which is more defensive than BIM Land's significant exposure to hospitality-led property development.
BSD also has larger non-development cash flow from its portfolio of mostly offices, for which there is healthy tenant demand. In contrast, BIM Land's non-development income stems from a smaller portfolio of hospitality properties such as condotels and villas in several coastal townships, which have more cyclical demand. BSD also has a stronger financial profile with low leverage and solid liquidity.
Key Assumptions
Fitch's key assumptions within our rating case for the issuer:
Contracted sales to remain steady at around
Cash collections from contracted sales to moderate to
Cash collections from non-development sources of
Construction costs on development properties of around
Capex of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
We do not expect positive rating action in the next 24 months, as we expect BSD's attributable contracted sales to remain steady;
Over the longer term, a significant and sustained increase in attributable contracted sales while maintaining a conservative financial profile could lead to a rating upgrade.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Attributable pre-sales of less than
Leverage sustained above 40%
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Comfortable Liquidity, Balanced Funding Mix: BSD has a track record of maintaining strong liquidity. Its cash balance stood at
It prepaid its
BSD has over
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
(C) 2023 Electronic News Publishing, source