KUALA LUMPUR: Malaysian Ratings Corporation Bhd (MARC) has affirmed its ratings on Horizon Hills Development Sdn Bhd's Islamic bank guaranteed medium-term notes (IMTN) programme of up to RM200 million at AAA-ID(bg).

It also affirmed its ratings on Islamic commercial paper (ICP) programme of up to RM70 million at MARC-1-ID9(s).

The ratings carry a stable outlook, MARC said in a statement today. The IMTN benefits from an unconditional and irrevocable guarantee by Public Bank Bhd (PBB), which carries MARC's public information rating of AAA.

It was premised on the bank's well-established domestic market position with about 13% of commercial banking sector assets, its strong asset quality, resilient recurring earnings and sound capitalisation, MARC said.

The affirmed short-term rating of MARC-1 for the ICP programme reflected MARC's public information corporate credit ratings on Gamuda Bhd and UEM Land Bhd, which jointly own Horizon Hills, the rating agency said.

Gamuda and UEM Land had provided unconditional and irrevocable undertakings in proportion to the size of their shareholdings to meet any financial obligation under the rated debt of up to RM280 million, it added.

Additionally, both shareholders had committed to provide equity contributions of up to RM30 million collectively to fund any cash flow deficit of the Horizon Hills project and/or to meet financial covenants under the rated facilities, MARC said.

The stable rating outlook incorporates the outlooks for UEM Land, Gamuda and PBB.

Horizon Hills is a 1,228-acre mixed residential project in Nusajaya, which is located in Iskandar Malaysia.

Horizon Hills was launched in 2007 with an estimated gross development value (GDV) of RM3.42 billion. It consists of 12 gated-and-guarded precincts, has an 18-hole golf course and a clubhouse, and is targeted at the middle- to high-end market. Prices start at RM350,000 a unit.

The project has achieved an average take-up rate of 77% for its launched phases as of July 31, 2009, with future expected billings from contracted sales (unbilled sales) standing at RM117.9 million, with sales supported by fairly strong  expatriate demand, MARC said.

For the financial year ended Dec 31, 2008 (FY08), Horizon Hills reported a sharp increase in revenue to RM126.2 million from RM26.1 million in the previous year with profit before tax rising to RM13.9 million from RM5.1 million.

MARC undertook a review of UEM Land and Gamuda's public information corporate credit ratings in conjunction with its review of its MARC-1 rating on the ICP programme, and viewed that the two companies continued to maintain credit profiles consistent with a MARC-1 ID(s) short-term rating.

UEM Land's government ownership and support through Khazanah Nasional Bhd, the government's investment holding arm, continued to be a major driver of its credit strength, MARC said.

Its financial profile, however, remained moderate on account of its uneven operating cash flow and exposure to cyclical property demand, it added.

Gamuda's recent financial performance had been characterised by lower operating margins and declining pre-tax profit but continued to benefit from the steady recurrent earnings generated by its toll road and water concessions, the rating agency said.

Liquidity at the consolidated entity is strong, with Gamuda, as of July 31, 2009, reporting RM1,031.8 million in consolidated unrestricted cash and bank balances.

Its consolidated debt-to-equity ratio improved to 0.48 times in FY09 from 0.59 times in the previous year, on the back of higher repayment of short-term borrowings as well as larger shareholders' fund attributed to higher retained earnings.

At their current levels, MARC views UEM Land and Gamuda's public information corporate credit ratings as stable.