Downgrade reflects growing concerns over the property developer’s weak liquidity position, says rating agency.
PETALING JAYA: YNH Property Bhd suffered yet another blow today when MARC Ratings Bhd downgraded its rating on the property developer’s Islamic Medium-Term Notes Programme (Sukuk Wakalah) to BBBIS from AIS, and placed the rating on MARCWatch Negative.
In a statement today, MARC Ratings said the downgrade reflects growing concerns over YNH’s “weak liquidity position” and further delays in the sale of assets, which is much-needed for cash infusion.
The downgrade comes on the heels of the massive sell-off of YNH shares in the past week. Since the start of the year, YNH’s share price has plunged by 71.3%, wiping RM1.6 billion off its market capitalisation.
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In a surprising move yesterday, Bursa Malaysia Securities froze the lower limit share price for YNH, Rapid Synergy Bhd, and Sarawak Consolidated Industries Bhd (SCIB) following the sharp fall in their share prices.
The freeze was due to the counters trading at static limit down prices for two consecutive days, the regulator said in a bourse filing. It set lower limit share price for YNH at RM1.22, Rapid Synergy at RM3.96, and SCIB at 53.5 sen.
MARC Ratings noted the group’s liquidity position, as reflected by cash and short-term deposits, stood at about RM17 million as of Sept 30, 2023 while its adjusted borrowings amounted to about RM1.3 billion.
This included the outstanding under the rated sukuk wakalah of RM323 million and the perpetual sukuk of RM345.9 million. The first tranche of RM153 million under the sukuk wakalah will mature on Feb 28, 2025.
The rating agency opines the group’s plans to launch other property projects would be impeded by its tight liquidity position.
The rating agency views that material issues faced by the YNH management and its “key shareholder” may have contributed to the slower-than-expected progress on asset monetisation and the weakening of its business profile.
“Furthermore, the significant decline in YNH’s share price in recent weeks would have placed additional liquidity pressures on the key shareholder,” it added.
Businessman and investor Yu Kuan Chon is the single largest shareholder in YNH with a 32.58% stake. He is also the group’s executive chairman.
MARC Ratings said it has been informed that the YNH management is addressing these issues.
“The MARCWatch Negative placement reflects the significant challenges YNH faces in addressing these issues including implementing a turnaround strategy to improve its business and credit profile.
“The placement would be uplifted if YNH makes meaningful progress. However, should performance continue to worsen, the rating would be subjected to further downgrades,” it warned.