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April 4 (The following statement was released by the rating agency)
Fitch Ratings has affirmed the Rating Long-Term Issuer Default Rating (IDR) of PT Alam Sutera Realty Tbk (ASRI) at 'B +' with a Stable Outlook. Ficth also has affirmed the ratings debt and senior unsecured bond ratings in the U.S. Dollar outstanding (issued by Natural Synergy Pte Ltd and guaranteed by ASRI) The 'B +' with a Recovery Rating at 'RR4'. Complete ranking list is available at the end of the press release.
ASRI ratings affirmation reflects small-scale enterprises, projects concentrated, and the cyclical nature inherent in the business of developing property. Ratings also recognize the track record of strong sales marketing ASRI in a variety of property development projects, land supply at a cost Low and development assets are of good quality.
Factors Supporting Rating
Stability in Central Decreased Demand: ASRI plans to shift the focus development to the middle segment in 2014 to address the sentiment of buyers weakened due to more stringent regulations in force from 2013 and elections that will last until July 2014. Middle segment consists over more first home buyers, which was less affected than The new regulations. Fitch expects this strategy and the quality of ASRI project development can help achieve the appropriate credit profile epidemic in 2014. Nevertheless, the ratio of presales / gross debt is likely to approaching the limit of 0.75x (end of 2013: 1.05x), which can downgrade considered.
Diversification is limited, but growing: ASRI presales grew by 50% to Rp 4.8 trillion in 2013. However, the company has scaled small compared to developers with a higher ranking. Fitch notes ASRI project that diversification has improved, which is more than 60% of presales in in 2013 contributed by outside development projects primarily in Serpong (2012: 18%). Nevertheless, ASRI still have a more diversified projects limited compared to companies that have a higher ranking.
A good track record: Rating acknowledge supplies of cheap land and ASRI wide, which covers more than 2,200 acres, the strategic location advantage of the main project, and track record of successful project execution. ASRI is one of the pioneers in developing large-scale settlement in Serpong, which is now a popular alternative compared to other regions in Jabodetabek. Fitch expects ASRI will be able to take advantage of the success of project in Serpong to launch new projects, as has been demonstrated through the achievement of sales above market expectations on Thursday.
Addressing the risk of exchange rate: ASRI has hedge the risk policy exchange rate over the principal amount of loans denominated in U.S. Dollars. company also targets for all times maintain cash reserves in U.S. Dollars enough for 3-4 times the coupon payment. Fitch believes this strategy can mitigate the risk of exchange rate but does not fully protect ASRI ASRI in case of extreme currency volatility.
Negative: future developments that may, individually and collectively, triggering the decline include:
- Rising debt ratios on an ongoing basis until the presales / gross debt under 0.75x (2012: 1.5x) on an ongoing basis.
- Increased exposure to non-core business
Positive: Increased ratings are not expected because of the nature of property sales the cyclical, small-scale enterprises, limited business diversification compared to other developers that have a higher ranking.
Rankings have been affirmed:
PT Alam Sutera Realty Tbk
Long-Term Rating affirmed at S 'B +'; Outlook Stable
Senior Unsecured rating is affirmed at 'B + / RR4'
Outstanding bonds issued USD 235m 6.95% by Natural Synergy Pte Ltd and guaranteed by PT Alam Sutera Realty Tbk, maturing in 2020, is affirmed in 'B + / RR4'
Outstanding bonds issued USD 225m 9% by the Natural Synergy Pte Ltd and guaranteed by PT Alam Sutera Realty Tbk, maturing in 2019, is affirmed in 'B + / RR4'