FITCH ASSIGNS BB- RATING TO AGUNG PODOMORO LAND
IQPlus, (22/05) - Fitch Ratings has assigned Indonesia-based property developer PT Agung Podomoro Land Tbk (APLN) a first-time Long-Term Issuer Default Rating (IDR) of 'BB-' with a Stable Outlook. The agency has also assigned a 'BB-(EXP)' expected rating to the proposed unsecured unsubordinated US dollar notes to be issued by APLN's wholly owned subsidiary APL Realty Holdings Pte Ltd. The proposed US dollar notes will be guaranteed by APLN and several of its subsidiaries. The final rating on the notes is contingent upon the receipt of final documents conforming to information already received.
Strong Investment Property Portfolio: APLN's investment property portfolio consists of 11 retail malls and one office building, as well as six hotels, which generated a combined recurring revenue of over IDR1.6 trillion in 2016, and is valued at IDR21.7 trillion (around USD1.6 billion). Recurring revenue from APLN's malls benefit from their mostly prime locations and strong footfall as a result of being located mostly within "superblocks" consisting of retail, commercial, hospitality and residential assets developed by APLN. Average mall occupancy was healthy at 85% in 2016, in spite of two of its larger properties - Kuningan City and Baywalk Mall - undergoing strategic changes to its tenant profile.
The tenant risk in APLN's malls is well dispersed, with the 10 largest tenants accounting for 16.4% of mall revenue in 2016. Lease tenors were four to five years on average, and provide good revenue visibility. APLN has a further four malls and two five-star hotels in the pipeline, which the company expects will be commissioned in the next three years and to boost recurring revenue. Recurring revenue covered APLN's net interest costs by 2.7x in 2016, and Fitch expects this to improve to 3.0x-3.3x over the next two years. Fitch adds dividends received from associates and deducts minority interests' share of the profit when calculating the recurring revenue coverage ratio.
Presales to Grow in 2017: We expect APLN's property sales to improve to around IDR4 trillion-5 trillion in 2017, supported by its geographical and product diversity. Our expectations are driven by improving demand for property purchases, following the government's fairly successful tax amnesty programme that concluded in March 2017 and regulatory measures to reignite the property market. We expect APLN's property sales to benefit from the strategic positioning of its assets, as well as its sales diversity across products and customer segments. In 2016, 38% of APLN's property sales were from the low-income customer segment, up from 14% in 2015. Demand from customers in this segment is more resilient to downturns because it is driven by first-time homebuyers rather than upgraders or property investors. (end)
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