KUALA LUMPUR: MARC Ratings has affirmed its rating of AA-IS with a stable outlook on Malaysian Resources Corporation Bhd's (MRCB) Islamic medium-term notes programme (sukuk murabahah) of up to RM5 billion.
The agency, in a statement, said that the maintained rating is mainly driven by MRCB's established property track record, particularly in transit-orientated developments (TOD), and further growth in its sizeable construction order book.
"The rating also incorporates the support extended by a key shareholder, the Employees Provident Fund. These strengths are tempered by low operating margins for its construction contracts and the sizeable working capital requirements," it added.
According to MARC Ratings, MRCB had an outstanding external construction order book of RM4.7 billion as of the end of the first half of 2024 (1H2024), which would provide earnings visibility through 2027.
The firm noted that the increased likelihood of securing new contracts, including the redevelopment of the Shah Alam Stadium and KL Sentral Station as well as the construction of five new LRT3 stations, would boost the order book by about RM4.7 billion.
"Due to the complexity of some of these projects, overall operating profit margin is expected to improve; in recent years, this has remained in the single digits, partly due to higher costs of materials and labour," it said.
However, the rating agency views that MRCB would need to strengthen its liquidity position to support working capital requirements for the projects.
In this regard, the group, which has low leverage with gross and net debt-to-equity ratios of 0.45 times and 0.27 times, has headroom to increase borrowing levels.
Under the RM5 billion rated programme, it currently has an outstanding of RM1.4 billion, or 68 per cent of total borrowings of RM2.1 billion.
The group is also expected to monetise assets to support its working capital requirements.