[RAM] RAM Ratings affirms IJM Land's A2(s)/Stable issue rating

RAM Ratings has affirmed the A₂(s)/Stable rating of IJM Land Berhad’s (the Company) RM2.0 bil Perpetual Sukuk Programme. The Perpetual Sukuk comes with a subordinated guarantee from the Company’s parent, IJM Corporation Berhad (IJM Corp or the Group), whose debt securities are rated AA₃/Stable by RAM. 

The sukuk rating is reflective of the unconditional and irrevocable subordinated guarantee extended by IJM Corp. The two-notch differential from the Group’s rating indicates the risk of deferrable profit distributions and the sukukholders’ deeply subordinated rights to claims in the event of insolvency. The (s) modifier reflects the purchase undertaking by IJM Land to acquire the sukukholders’ interest in the relevant Musharakah Venture from the Sukuk Trustee at the agreed exercise price. IJM Land is the property development arm of IJM Corp.  Demonstrated financial backing from IJM Corp through consistent unsecured advances underscores IJM Land’s strategic importance to IJM Corp. 

IJM Land’s revenue grew to RM1.9 bil in FY Mar 2024 (FY Mar 2023: RM1.5 bil) due to the higher work progress of ongoing projects and strong property sales. That said, the Company’s operating profit before depreciation, interest and tax margin narrowed to 17.1% (FY Mar 2023: 26.8%) due to a higher write-down in inventories. Unbilled sales stood at a healthy RM2.6 bil as at end-March 2024 (down from RM3.0 bil as at end-March 2023), driven by solid take-up rates for the Company’s ongoing projects. This should provide revenue visibility and support its near-term financial performance.

Lower debt levels saw IJM Land’s gearing improve to 0.47 times as at end of fiscal 2024 from 0.53 times a year ago. Its debt servicing ability remained steady, with funds from operations debt coverage (FFODC) of 0.11 times (fiscal 2023: 0.10 times). Excluding the unsecured advances from IJM Corp (no fixed payment date) and other intercompany borrowings –collectively accounting for 61% of total debts - IJM Land’s FFODC and gearing would be a better 0.27 times and 0.18 times, respectively.

IJM Land’s property business is cyclical, as sales and financial performance typically correlate with the general health of the economy. Residential transaction value and volume for 2023 increased 7.1% and 3.0% y-o-y, respectively, in-line with Malaysia’s 3.7% GDP expansion during the year. The economic momentum was led by resilient domestic demand and accommodative government policies for home purchases and ownership amid a weaker external environment. Property market growth in 2024 is expected to continue at a measured pace premised on continued government support and robust domestic growth prospects.


Analytical contacts
Johan Faizul
(603) 3385 2518
johan@ram.com.my

Karin Koh, CFA
(603) 3385 2508
karin@ram.com.my

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