[RAM] RAM Ratings assigns AAA corporate credit rating to Pelaburan Hartanah Berhad

RAM Ratings has assigned AAA/Stable/P1 corporate credit ratings to Pelaburan Hartanah Berhad (PHB or the Group). 

The ratings reflect PHB’s strong mandate and demonstrated support from the Malaysian government to increase bumiputera ownership and participation in the country’s commercial real estate sector through its management of unit trust fund Amanah Hartanah Bumiputera (AHB or the Fund). Since its incorporation, PHB has grown its portfolio exponentially to approximately RM11 bil as at end-October 2023. The Group aims to increase this to RM25 bil by 2030. It currently owns 25 commercial property assets (21 of which are under AHB), diversified over five sectors (office, retail, warehouse, healthcare and education).

Given PHB’s mandate, we view the Group to be one of the key agencies in the national development agenda in advancing the bumiputera community, and therefore, hold a high degree of political and institutional importance to the Government. The bumiputera community accounted for 65% of Malaysia’s 32.7 mil population in 2022. Its function is further underlined by the government’s full ownership of the Group via Yayasan Amanah Hartanah Bumiputera (YAHB), whose chairman is the prime minister. PHB’s board of directors, and by extension its committee members, consists of sector professionals from other government-linked corporations and a representative of the Ministry of Finance. Its operations come under the supervision of the country’s Economic Planning Unit.

The federal government has, in the past, extended financial and non-financial assistance to PHB, with annual grants ranging from RM50 mil to RM250 mil since 2011. These amounts are provided for in the government’s annual budget as development expenditure. Likewise, any negative fair value adjustments on AHB properties are recorded in PHB’s income statement as the Fund holds only “beneficial ownership” of the assets. This allows AHB’s net asset value to remain fixed at RM1 per unit. Such backing, alongside the Group’s close relationship with the government, anchors our belief that support will be extended whenever required.

PHB’s liabilities are expected to increase as it plans to fund future acquisitions and projects with a combination of new borrowings, the sale of its AHB units and internally generated funds. This is in line with its strategy to grow its portfolio value to RM25 bil and AHB’s assets under management to RM20 bil by 2030 (end-July 2023: RM11.1 bil and RM4.65 bil, respectively). PHB’s property lease liabilities and borrowings stood at RM6.05 bil as at end-December 2021, up from RM5.04 bil a year earlier. Excluding fixed lease liabilities owed to AHB to facilitate the operations of the Fund, the Group’s external borrowings amounted to RM1.43 bil as at end-December 2022 (end-December 2021: RM1.22 bil). This translates into a low gearing of 0.28 times on the same date (end-December 2021: 0.24 times), which would afford PHB some headroom to support its future plans.

Interest coverage and cash to short-term debt ratios stayed below 1 time, coming in at a respective 0.58 times and 0.61 times as at end-December 2022 (end-December 2021: 0.72 times and 0.64 times). While the Group’s liquidity position appears inadequate, large available credit lines (RM700 mil) and internal funds afford a high degree of financial flexibility. PHB also continues to receive government support in view of its bumiputra mandate.

On balance, the Group’s portfolio is highly concentrated in office assets, which contribute 50% of revenue and profits. This asset class registered an average occupancy rate of only 53% in 5M FY Dec 2023, reflecting oversupplied market conditions. The ongoing shift in PHB’s strategic asset allocation towards the industrial, healthcare and education sectors will reduce exposure in the office sector. To improve the occupancy of existing office buildings, PHB is undertaking asset enhancement programmes, offering attractive tenancy packages and working towards obtaining green building status for at least 50% of its property portfolio. The Group also collaborates strategically with co-working space providers and their tenants to cater to their escalating demands as small and medium enterprises grow.


Analytical contacts
Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my

Seri Nuralya Munawir
(603) 3385 2484
nuralya@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my