RATING Agency Malaysia Bhd (RAM) said it has upgraded the long-term rating of SP Setia Bhd's RM125mil redeemable unsecured bonds to A1 from A2 because of the company's proven track record and resilience.

In a statement, RAM said it has also lifted the Rating Watch with developing outlook after the company successfully completed its capital-raising exercises.

RAM placed SP Setia's long-term rating of A2 on Rating Watch on April 8. The agency said that despite the difficult operating environment in Johor, where the company's two main property projects are located, SP Setia managed to improve its performance each year.

Its acquisition of 3,930 acres in Selangor, known as North Hummock, further boosted its business profile, it said.

RAM expects SP Setia's leverage ratio to rise to 0.7 at end-October 2003 with a total debt of about RM900mil.

The additional loans, it said, will be used to finance the remaining purchase of North Hummock and the deferred payment for the Batu Pahat-Ayer Hitam-Kluang road project.

RAM said the funding for the road project will be fully assumed by the government once the construction is completed.

''Given this and coupled with SP Setia's impressive cash pile of more than RM500mil as at end-October 2002, we believe that the group's debt level will be manageable and within our expectation,'' it said, adding that SP Setia's leverage ratio is likely to be reduced to below 0.5 within the next two years with the planned sale of some 1,000 acres in North Hummock.

Source: The Star