RAM Ratings has assigned a AAA/Stable rating to KLCC Property Holdings Berhad’s proposed RM5 billion Sukuk Wakalah Programme.
The Issuer is part of the KLCCP Stapled Group, under which KLCCP shares are stapled to units of KLCC Real Estate Investment Trust (KLCC REIT) on a one-to-one basis by a ‘stapling deed’. As at end-2023, the Group was the largest REIT in Malaysia by asset size (RM18.3 bil) and market capitalisation (RM12.8 bil). With contributions from Suria KLCC mall, Menara Dayabumi, Mandarin Oriental, Kuala Lumpur (MOKL) and management services, KLCCP accounted for a respective 64% and 52% of the Group’s revenue and operating profit for FY Dec 2023.
RAM said the AAA rating is premised on KLCCP’s diversified pool of prime assets, favourable lease and tenant profile, excellent financial flexibility, strong financial profile and strong linkage to its ultimate parent, Petroliam Nasional Berhad (PETRONAS). The iconic landmarks within the KLCC Development give the Issuer an edge in attracting quality tenants, allowing the assets to command above-average occupancy and rental rates. KLCCP has strong earnings visibility, stemming from the highly fixed nature of its rental earnings. These include (1) Suria KLCC mall’s largely fixed rental structure; and (2) the long-tenured triple-net leases for Menara Dayabumi and Menara Maxis.
The Group’s strong linkage to PETRONAS, proven ability to raise funds through the debt and capital markets (via subsidiaries), and diversified sources of funding afford the Issuer superior financial flexibility. KLCCP’s unencumbered assets and cash reserves (excluding cash flows of MOKL and Suria KLCC) are more than adequate to cover near-term liabilities. In early-2024, KLCCP entered into a Share Purchase Agreement to acquire the remaining 40% stake in Suria KLCC from CBRE for RM1.95 bil. Even assuming the proposed acquisition will be entirely debt-funded, we still view the estimated leverage and fixed charge cover ratios, at a respective 0.34 times and 4.32 times, to be strong.
The ratings agency said it views KLCCP Stapled Group-PETRONAS linkage as close, considering the national oil company’s significant 66.94% effective stake in the Stapled Group – a 2.26% direct stake and 64.68% of indirect stake held through KLCC (Holdings) Sdn Bhd (KLCCH), the Group’s board composition and the close association between assets under the Group, KLCCH and the PETRONAS group. Support from PETRONAS is also evident in the master lease agreements for most of the Stapled Group’s office buildings (except Menara Maxis), which give PETRONAS or its nominee the right of first refusal to purchase the office buildings in PETRONAS Twin Towers and Menara 3 PETRONAS should the Stapled Group opt to dispose of them. As such, KLCCP is deemed highly likely to receive support from both KLCCH and PETRONAS in the unlikely event of financial distress.
