RAM Ratings Reaffirms Ratings of Axis REIT Sukuk's RM110.0 million First Sukuk

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1. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications RAM​ ​Ratings​ ​Reaffirms​ ​Ratings​ ​of​ ​Axis​ ​REIT Sukuk's​ ​RM110.0​ ​million​ ​First​ ​Sukuk 5​ ​September​ ​2017 RAM​ ​Ratings​ ​has​ ​reaffirmed​ ​the​ ​respective​ ​AAA,​ ​AA1,​ ​AA2​ ​and​ ​AA3​ ​ratings​ ​of​ ​Axis​ ​REIT​ ​Sukuk Berhad's​ ​(ARSB​ ​or​ ​the​ ​Issuer)​ ​RM110.0​ ​million​ ​of​ ​Class​ ​A,​ ​Class​ ​B,​ ​Class​ ​C​ ​and​ ​Class​ ​D​ ​sukuk (collectively,​ ​the​ ​First​ ​Sukuk)​ ​under​ ​its​ ​First​ ​Sukuk​ ​Issue;​ ​all​ ​the​ ​ratings​ ​have​ ​a​ ​stable​ ​outlook. The​ ​rating​ ​action​ ​reflects​ ​the​ ​underlying​ ​portfolio's​ ​performance​ ​to​ ​date​ ​and​ ​our​ ​expectation​ ​that it​ ​will​ ​remain​ ​stable,​ ​as​ ​well​ ​as​ ​the​ ​transaction​ ​structure's​ ​available​ ​credit​ ​support. The​ ​First​ ​Sukuk​ ​is​ ​backed​ ​by​ ​a​ ​portfolio​ ​of​ ​3​ ​industrial​ ​and​ ​industrial-office​ ​mixed​ ​properties​ ​and a​ ​hypermarket,​ ​i.e.​ ​Axis​ ​Steel​ ​Centre,​ ​Axis​ ​Vista​ ​(AV),​ ​Bukit​ ​Raja​ ​Distribution​ ​Centre​ ​(BRDC) and​ ​Tesco​ ​Bukit​ ​Indah​ ​(TBI).​ ​The​ ​portfolio's​ ​net​ ​property​ ​income​ ​(NPI)​ ​of​ ​RM20.4​ ​million​ ​in​ ​2016 (2015:​ ​RM20.5​ ​million)​ ​remained​ ​within​ ​expectation.​ ​Despite​ ​the​ ​lower​ ​occupancy​ ​rate​ ​and​ ​loss of​ ​revenue​ ​at​ ​AV​ ​following​ ​the​ ​departure​ ​of​ ​one​ ​of​ ​its​ ​tenants​ ​in​ ​2016,​ ​the​ ​portfolio's​ ​NPI​ ​was held​ ​up​ ​by​ ​the​ ​upward​ ​rental​ ​reversions​ ​for​ ​BRDC​ ​and​ ​TBI.​ ​Based​ ​on​ ​RAM's​ ​adjusted​ ​portfolio value​ ​of​ ​RM217.3​ ​million,​ ​the​ ​resultant​ ​cumulative​ ​loan-to-value​ ​ratios​ ​of​ ​43.7%,​ ​46.0%,​ ​48.3% and​ ​50.6%,​ ​coupled​ ​with​ ​the​ ​debt-service​ ​coverage​ ​ratios​ ​of​ ​2.5,​ ​2.4,​ ​2.2​ ​and​ ​2.1​ ​times​ ​remain commensurate​ ​with​ ​the​ ​respective​ ​AAA,​ ​AA1,​ ​AA2​ ​and​ ​AA3​ ​ratings​ ​of​ ​the​ ​Class​ ​A​ ​to​ ​Class​ ​D sukuk. Going​ ​forward,​ ​we​ ​expect​ ​the​ ​portfolio's​ ​stabilised​ ​annual​ ​NPI​ ​to​ ​stay​ ​in​ ​line​ ​with​ ​our​ ​assumed NPI​ ​of​ ​RM20.0​ ​million,​ ​supported​ ​by​ ​the​ ​properties'​ ​strategic​ ​locations,​ ​longer-than-average lease​ ​maturities,​ ​healthy​ ​demand​ ​for​ ​the​ ​portfolio's​ ​assets​ ​due​ ​to​ ​the​ ​shortage​ ​of​ ​comparable properties,​ ​and​ ​the​ ​portfolio's​ ​average​ ​rental​ ​rates​ ​that​ ​are​ ​deemed​ ​still​ ​in​ ​line​ ​with​ ​market​ ​rates. That​ ​said,​ ​3​ ​of​ ​the​ ​4​ ​assets​ ​are​ ​single-tenanted;​ ​any​ ​non-renewal​ ​or​ ​early​ ​termination​ ​of tenancies​ ​will​ ​have​ ​a​ ​material​ ​impact​ ​on​ ​the​ ​portfolio's​ ​NPI.​ ​While​ ​the​ ​portfolio​ ​may​ ​be vulnerable​ ​to​ ​slower​ ​rental​ ​collections​ ​given​ ​the​ ​challenging​ ​market,​ ​we​ ​expect​ ​it​ ​to​ ​remain manageable. The​ ​Issuer's​ ​finance​ ​service​ ​coverage​ ​ratio​ ​(FSCR)​ ​vis-à-vis​ ​the​ ​First​ ​Sukuk​ ​stood​ ​at​ ​4.03​ ​times as​ ​at​ ​end-December​ ​2016,​ ​i.e.​ ​well​ ​above​ ​the​ ​covenanted​ ​1.50​ ​times.​ ​Axis​ ​Real​ ​Estate Investment​ ​Trust's​ ​(Axis​ ​REIT)​ ​FSCR​ ​was​ ​also​ ​healthy​ ​at​ ​5.67​ ​times​ ​as​ ​at​ ​the​ ​same​ ​date,​ ​and well​ ​above​ ​the​ ​covenanted​ ​1.50​ ​times.
2. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications ARSB​ ​is​ ​a​ ​special-purpose​ ​vehicle​ ​set​ ​up​ ​by​ ​Axis​ ​REIT​ ​as​ ​a​ ​funding​ ​conduit​ ​for​ ​its​ ​perpetual Islamic​ ​MTN​ ​Programme​ ​of​ ​up​ ​to​ ​RM3.0​ ​billion. Organisation​ ​Name: News​ ​Type: RAM​ ​Rating​ ​Services​ ​Berhad RATING​ ​ANNOUNCEMENT Source: BNM​ ​Announcements Media​ ​Contact Padthma​ ​Subbiah (603)​ ​7628​ ​1162 padthma@ram.com.my Disclaimer: The​ ​credit​ ​rating​ ​is​ ​not​ ​a​ ​recommendation​ ​to​ ​purchase,​ ​sell​ ​or​ ​hold​ ​a security,​ ​inasmuch​ ​as​ ​it​ ​does​ ​not​ ​comment​ ​on​ ​the​ ​security's​ ​market price​ ​or​ ​its​ ​suitability​ ​for​ ​a​ ​particular​ ​investor,​ ​nor​ ​does​ ​it​ ​involve​ ​any audit​ ​by​ ​RAM​ ​Ratings.​ ​The​ ​credit​ ​rating​ ​also​ ​does​ ​not​ ​reflect​ ​the legality​ ​and​ ​enforceability​ ​of​ ​financial​ ​obligations. RAM​ ​Ratings​ ​receives​ ​compensation​ ​for​ ​its​ ​rating​ ​services,​ ​normally paid​ ​by​ ​the​ ​issuers​ ​of​ ​such​ ​securities​ ​or​ ​the​ ​rated​ ​entity,​ ​and sometimes​ ​third​ ​parties​ ​participating​ ​in​ ​marketing​ ​the​ ​securities, insurers,​ ​guarantors,​ ​other​ ​obligors,​ ​underwriters,​ ​etc.​ ​The​ ​receipt​ ​of this​ ​compensation​ ​has​ ​no​ ​influence​ ​on​ ​RAM​ ​Ratings'​ ​credit​ ​opinions or​ ​other​ ​analytical​ ​processes.​ ​In​ ​all​ ​instances,​ ​RAM​ ​Ratings​ ​is committed​ ​to​ ​preserving​ ​the​ ​objectivity,​ ​integrity​ ​and​ ​independence​ ​of its​ ​ratings.​ ​Rating​ ​fees​ ​are​ ​communicated​ ​to​ ​clients​ ​prior​ ​to​ ​the issuance​ ​of​ ​rating​ ​opinions.​ ​While​ ​RAM​ ​Ratings​ ​reserves​ ​the​ ​right​ ​to disseminate​ ​the​ ​ratings,​ ​it​ ​receives​ ​no​ ​payment​ ​for​ ​doing​ ​so,​ ​except for​ ​subscriptions​ ​to​ ​its​ ​publications. Similarly,​ ​the​ ​disclaimers​ ​above​ ​also​ ​apply​ ​to​ ​RAM​ ​Ratings' credit-related​ ​analysis​ ​and​ ​commentaries,​ ​where​ ​relevant.