Singapore, March 12, 2018 -- Moody's Investors Service has affirmed the Ba3 corporate family rating
of Bumi Serpong Damai TBK (P.T.) (BSD) and affirmed the
Ba3 backed senior unsecured rating of the 2020 notes and 2023 notes issued
by Global Prime Capital Pte. Ltd., a wholly owned
subsidiary of BSD. The notes are guaranteed by BSD and some of
its subsidiaries.
The rating outlook is changed to positive from stable.
RATINGS RATIONALE
"The positive outlook on BSD's ratings reflect our expectation
that an increase in the company's recurring income and strong financial
metrics over the next 12-18 months could support an upgrade of
its ratings" says Jacintha Poh, a Moody's Vice President and Senior
Analyst.
BSD has continued to grow its recurring revenue base by around 15%
year-on-year over the last three years, such that
its recurring EBIT covers at least 1.0x of interest expense.
Moody's expects the company's recurring revenue to grow 25%-30%
year-on-year, supported by contributions from office
towers acquired in 2017 and newly completed investment properties.
BSD's credit metrics in 2017 were strong for its ratings.
Its adjusted debt/homebuilding EBITDA was at 1.5x and homebuilding
EBIT/interest expense was 10.4x, driven by high levels of
sale of commercial land plots.
Although Moody's expects BSD's marketing sales levels to normalize
to around IDR6 trillion in 2018 and 2019, the company's credit
metrics will stay strong over this period with adjusted debt/homebuilding
EBITDA at around 2.5x and homebuilding EBIT/interest expense at
around 5.0x. These credit metrics will be supportive of
a ratings upgrade.
Despite weakness in Indonesia's property market since the second
half of 2015, BSD has continued to achieve strong marketing sales
through new project launches and the sale of commercial land plots.
Excluding BSD's sales of land to its various joint-venture
projects, the company recorded more than IDR5.5 trillion
of annual marketing sales over the last three years.
BSD's Ba3 ratings reflect its established position as one of the largest
property developers in Indonesia, with diversification across multiple
projects and property segments -- residential, office,
retail, industrial and hospitality.
The company's focus on selling land lots and low-rise commercial
and residential properties entails relatively low development risks and
provides it with the flexibility to adjust the scale of its operations
in line with demand.
Nonetheless, BSD remains exposed to: (1) concentration risk
as it derives the majority of its revenue from BSD City; (2) the
volatile property sector in Indonesia; and (3) the evolving regulatory
environment in Indonesia.
The company is also exposed to foreign exchange rate risk as US dollar
bond issuances made up around 84% of its outstanding debt as of
31 December 2017, while its business transactions are in Indonesian
rupiah.
Although the company intends to use non-deliverable call spread
option facilities to protect the principal amount of its US dollar debt
from adverse exchange rate volatility, it had not yet done so as
of 31 December 2017. Nonetheless, foreign exchange rate risk
is partially mitigated by the long-dated maturities of its US dollar
bonds.
BSD's ratings could be upgraded over the next 12-18 months
if the company successfully executes its business plans and grows revenue
towards IDR10 trillion while maintaining healthy financial metrics and
strong liquidity.
Credit metrics that would support an upgrade include adjusted debt/homebuilding
EBITDA below 2.5x, and adjusted homebuilding EBIT/interest
coverage above 5.0x. An upgrade will also require that the
recurring EBIT to cover at least 1.0x of interest expense.
Given the positive outlook, BSD's ratings are unlikely to
be downgraded over the next 12-18 months. However,
the outlook could return to stable if: (1) the company fails to
implement its business plans; (2) there is a deterioration in the
property market, leading to weakness in its operations such that
adjusted debt/homebuilding EBITDA stays above 2.5x and adjusted
homebuilding EBIT/interest coverage falls below 5.0x.
The ratings will face downward pressure if there are signs of cash leaking
from BSD to fund affiliated companies, for example, through
intercompany loans, aggressive cash dividends, or investments
in affiliates.
The principal methodology used in these ratings was Homebuilding And Property
Development Industry published in January 2018. Please see the
Rating Methodologies page on www.moodys.com for a copy of
this methodology.
Established in 1984, Bumi Serpong Damai TBK (P.T.)
(BSD) is the largest developer listed on the Indonesia Stock Exchange
by market capitalization. The company and its subsidiaries are
engaged in the development, management and operation of residential
townships, condominium towers, office buildings, retail
malls and hotel properties. The company is sponsored by Sinarmas
Land Limited, which held a 58% interest in BSD at 31 December
2017.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Jacintha Poh
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
