[MARC] MARC Ratings assigns preliminary ratings to Trusmadi Capital’s proposed Issue 2

MARC Ratings has assigned preliminary ratings of AAA (Class A MTN of up to RM220 million), AA (Class B MTN of up to RM40 million) and A (Class C MTN of up to RM40 million) to Trusmadi Capital Sdn Bhd’s Issue 2 (Trusmadi Issue 2) under its Medium-Term Notes (MTN) Programme of RM3.0 billion. The ratings outlook is stable.

The proposed Trusmadi Issue 2 issuance of up to RM345 million is under the existing RM3.0 billion Trusmadi Capital MTN programme. Proceeds from the Trusmadi Issue 2 issuance will be utilised to settle the outstanding issuances of Murud Capital Sdn Bhd of RM342.0 million (including RM1.0 million transaction cost) which are due on March 28, 2025. Upon settlement, the charge on the collateral property Platinum Sentral to Murud Capital’s issuances will be released and charged to Trusmadi Issue 2.

The ratings assigned to Trusmadi Issue 2 reflect the loan-to-value (LTV) ratios of the MTN classes that are within the benchmarks MARC Ratings applies for the respective rating bands.

The LTV ratios were derived using MARC Ratings’ income capitalisation approach in which Platinum Sentral was valued at RM513.0 million by using a stabilised net operating income (NOI) of RM39.5 million. The valuation represents a 23.9% discount from Platinum Sentral’s market value of RM673.0 million as at December 31, 2024, as ascertained by an independent valuer.

Platinum Sentral has a total net lettable area (NLA) of 480,062 sq ft, comprising office units (88.3%) and retail spaces (11.7%). It recorded a 95% occupancy rate as at end-2024, with three tenants accounting for about 83.8% of total NLA. MARC Ratings continues to view Platinum Sentral as being highly exposed to tenant concentration risk. Of the three tenants, SME Corporation Malaysia (SME Corp) accounted for 41.3%, Platinum KLS Centre (M) Sdn Bhd 33.2% and SBM Malaysia Sdn Bhd 9.3%.

The rating agency notes with concern that tenancies for a sizeable 24% of Platinum Sentral’s tenanted NLA will be up for renewal in 2025, mainly comprising Platinum KLS. Meanwhile, the tenancies for SBM Malaysia and SME Corp will be up for renewal in December 2026 and June 2027. The rating agency draws comfort from the demonstrated track record of the REIT Manager, Sentral REIT Management Sdn Bhd, in securing high-quality tenants on a timely basis to mitigate the looming renewal risk. Notwithstanding this, given Platinum Sentral’s average rental rate of RM8.60 psf in 2024 was higher than the RM6.50 psf to RM7.50 psf for prime office buildings within the KL city centre, there is an increasing likelihood that the average rental rate in Platinum Sentral will trend lower than the current rates upon the renewal of tenancies.

The operational performance of Platinum Sentral in the past five years has been steady with occupancy rates increasing from 80% as at December 2021 to 95% in December 2024, and average rental rates remained stable within the range of RM8.60 psf to RM8.84 psf. This has resulted in the property’s NOI ranging between RM33 million and RM41 million. Over the next three years, the NOI is deemed sufficient to support the LTV ratios. Over the longer term, in the event of non-renewal and/or renewal at sharply lower rental rates, the LTV ratios could be breached. Unless any breach is not remedied, for instance, through the reduction of outstanding issuances to align with the LTV band, the ratings would be exposed to downward pressures.

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