[MARC] MARC Ratings affirms MARC-1IS rating on Titijaya’s ICP Programme

MARC Ratings has affirmed its MARC-1IS rating on Titijaya Land Berhad’s (Titijaya) RM300 million Islamic Commercial Papers (ICP) Programme.

The rating affirmation mainly reflects Titijaya’s healthy balance sheet, characterised by low leverage and a strong liquidity position relative to group borrowings. The group’s credit strength is also underpinned by its established property development track record with a primary focus on mature areas and an increasing foothold in recurring income-generating assets. The rating agency, however, remains concerned over the low-to-modest take-up rates for Titijaya’s ongoing developments, although the group currently has the wherewithal to shoulder the corresponding holding costs.

Total combined gross development value for ongoing projects stood at RM1.0 billion as at end-March 2025, with an overall take-up rate standing at 34.8%. Among the reasons attributed to the slow take-up rate are the affordability factors, given the medium-to-high unit prices in some projects and the increasing competition in the high-rise segment of the residential property market. Unbilled sales remained modest at RM251 million as at end-March 2025.

MARC Ratings draws comfort from Titijaya’s increased efforts to strengthen its recurring income segment, aimed at moving away from being a pure-play property developer to an owner/operator of investment properties. The group targets this segment to contribute up to 30% of its earnings over the medium term. It expects to generate RM18.5 million p.a. from DHL Properties (M) Sdn Bhd for the 10-year rental of the built-to-lease logistics facility in Bayan Lepas, Penang, of which Titijaya completed construction in October 2024. The group’s hospitality segment has also begun contributing to revenue, amounting to about RM8 million for the first 11 months (February to December 2024), after its 396-room Citadines Waterfront Kota Kinabalu hotel commenced operations in February 2024. Annual revenue is projected at between RM15 million and RM20 million, assuming an occupancy rate of between 60% and 75%.

The rating agency also notes that Titijaya expects a rental income from Press Metal Aluminium Holdings Berhad of around RM8 million p.a. on a centralised labour quarters facility in Klang Sentral, Selangor, under a minimum lease term of three years. Construction is scheduled to commence by end-2025 and is expected to be completed by early 2027. Additionally, Titijaya is finalising the terms for the acquisition of student accommodations at the University of Malaysia Sabah (UMS), Kota Kinabalu, along with the nearby land parcel with an existing building structure, for RM105 million. The acquisition is expected to be completed by end-February 2026.

Notwithstanding the growth prospects for the recurrent income segment, Titijaya is exposed to execution risk in completing construction on a timely basis and in meeting clients’ requirements. In terms of the capex requirement for these projects, amounting to a total of about RM135 million over the next three years, the group is deemed to have sufficient financial resources. Borrowings, which stood at RM299.0 million as at end-June 2025 (FY2025), with a debt-to-equity (DE) ratio standing at 0.22x, are expected to rise from drawdowns under the unrated RM500 million IMTN programme, established in December 2024. Proceeds are expected to be mainly utilised to fund acquisition and capex for the new projects. Assuming a RM200 million drawdown under the unrated programme, the DE ratio would rise to around 0.37x.

In FY2025, the group recorded lower revenue of RM201.3 million and operating profit of RM27.9 million (FY2024: RM254.9 million, RM46.1 million) due to the completion of projects with high take-up rates, limited contributions from the new project developments at an initial stage, and an increase in operating costs. In the near term, the group’s performance will be supported by recurring income from hotel operations in Kota Kinabalu, Sabah, and the lease of the logistics facility in Bayan Lepas, Penang.

Fatin Sadiqah Saberam, +603-2717 2934/ fatin@marc.com.my
Farhan Darham, +603-2717 2945/ farhan@marc.com.my
Yazmin Abdul Aziz, +603-2717 2948/ yazmin@marc.com.my