[MARC] MARC Ratings affirms rating of AIS on HCK’s RM2.0 billion sukuk programme

MARC Ratings has affirmed its rating of AIS on HCK Cap Access Berhad’s RM2.0 billion Islamic Medium-Term Notes (IMTN) Programme. HCK Cap Access is a wholly-owned funding vehicle of HCK Capital Group Berhad (HCK). The rating outlook is stable.

HCK has completed several mixed-development projects with educational establishments being a catalyst for sales. Completed projects in urbanising areas, namely Subang Jaya, Setia Alam, and Cyberjaya, have generally been well received. Its existing undertaking includes the office and premium suite development at the HCK Tower in Damansara (gross development value (GDV): RM168.2 million), and the remaining projects under existing developments, namely residential, retail and commercial components at Edusphere in Cyberjaya (GDV: RM379.1 million), and a high-rise residential condominium at Edusentral in Setia Alam (GDV: RM188.0 million). With its current developments largely nearing completion, the group has planned projects to be launched through 2027, with a combined GDV of up to RM2.1 billion. It recently launched eSentral, a new development in Seksyen U5, Shah Alam (Damansara West). The rating is moderated by the group’s development cycle, characterised by the completion of several sizeable developments and measured launches of new projects which could exert pressure on cash flows and balance sheet.

The group’s key shareholders have longstanding involvement in the education sector, aligning well with HCK’s strategy of integrating educational elements into its property development. This synergy has supported HCK’s key developments such as Edumetro, Edusphere and Edusentral.

Following the completion of the major components in the Edumetro project in 2024, HCK reported lower revenue of RM24.2 million during 1Q2025. Due to the relatively low margin from the sale of completed units under the Edumetro “white knight” project, and the new projects being in the nascent stages, the operating margin remained in the single digits at 8.2%. Near-term performance will be supported by the sale of the remaining completed units and the newly launched eSentral. The group’s high inventory of RM449.6 million, relative to the scale of its ongoing development, has been largely attributed to the strata office units in its headquarters, HCK Tower, in Damansara Perdana, a development it acquired in 2023. Excluding the strata office units, completed inventory would stand at a moderate RM79.3 million as at end-2024.

HCK’s borrowings are largely secured against each project. Borrowings reduced to RM285.0 million as at end-1Q2025 from RM445.7 in 2023, due to sales proceeds from completed projects. Debt-to-equity ratio eased to 0.57x (2023: 1.24x). The group has strengthened its equity base through a RM100.0 million share issuance and warrant conversions, with outstanding warrants potentially raising another RM54.3 million. Operating cash flow turned positive in 2024, driven by higher sales of completed units and progress billings from ongoing inventory, although this would remain volatile due to ongoing project timelines.

Liquidity is supported by RM162.4 million in unutilised banking facilities. The planned monetisation of the Peninsular campus in 2025, valued at RM138.0 million, would strengthen its liquidity position and balance sheet, considering the expected increase in funding needs to undertake ongoing projects and future launches.

Chong Wat Son, +603-2717 2929/ watson@marc.com.my
Vanessa Leong, +603-2717 2931/ xinyue@marc.com.my
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my