PEFINDO affirms “idA+” rating for PT Pembangunan Perumahan (Persero) Tbk, outlook is revised to negative

(March 11, 2020)--PEFINDO has affirmed its “idA+” ratings for PT Pembangunan Perumahan (Persero) Tbk (PTPP) and its Shelf-Registered Bond II Year 2018 and Year 2019 of a maximum of IDR3.0 trillion. PEFINDO has also affirmed its “idA-” rating for PTPP’s Perpetual Bond Phase I of IDR150 billion. It is rated two notches below PTPP’s corporate rating to incorporate its subordinated bond characteristic with full discretion in coupon deferral. The outlook for the corporate rating was revised to “negative” from “stable” to anticipate further deterioration on PTPP’s financial performance, due to higher debt disbursement to finance its capital expenditure (capex) and working capital, especially in property segment. Moreover, the revenue achievement was quite stagnant in 2019, due to election year, low demand for EPC segment, and weak property demand. As the result, the Company’s financial ratios have deteriorated, as shown by debt to EBITDA ratio of 4.7x in 2019.

An obligor rated idA has a strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors.

However, the obligor is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than higher-rated obligors. The Plus (+) sign indicates that the rating is relatively strong within the respective rating category.

Debt security rated idA indicates that the obligor’s capacity to meet its long-term financial commitments on the debt security, relative to other Indonesian obligors, is strong, however, the debt security is somewhat more susceptible to adverse effects of changes in circumstances and economic conditions than higher-rated debt. The Minus (-) sign indicates that the rating is relatively weak within the respective rating category.

The corporate rating reflects PTPP’s strong presence in the national construction industry, diversified revenue sources, and relatively strong financial flexibility. The rating is constrained by increasing financial leverage in the near to medium term, following significant capex, risks from expansion into new businesses, and the relatively volatile business environment.

The rating could be lowered if the financial profile further deteriorates, as indicated by debt to EBITDA above 5x, over the next 12-18 months. The outlook could be revised to stable if PTPP improves its financial profile to the levels that are commensurate with an idA+ rating on sustained basis.

Established in 1953, PTPP is one of the largest construction and engineering, procurement, and construction (EPC) companies in Indonesia. It is expanding into the property, realty and precast sectors, as well as heavy equipment rental and investments in the energy and infrastructure sectors. As of December 31, 2019, its shareholders were the Indonesian government (51.0%), the Employees Cooperative (Kopkar) (0.07%), and the public (48.93%). (ends)