RAM Ratings reaffirms Dynasty Harmony’s AA3/Stable issue rating

Published on 17 Aug 2021.

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RAM Ratings has reaffirmed the AA3/Stable rating of the RM165 mil Islamic Medium-Term Notes (the Sukuk) (2018/2033) under Dynasty Harmony Sdn Bhd’s (Dynasty Harmony) RM300 mil Sukuk Programme (2018/2036). 

A wholly-owned funding vehicle of GFM Services Berhad, Dynasty Harmony relies solely on the residual cashflow of sister company, KP Mukah Development Sdn Bhd - the concession-holder for the development and maintenance of the Universiti Teknologi MARA (UiTM) campus in Mukah, Sarawak (the Project) – after the latter meets its own operational and financial obligations. As such, KP Mukah and Dynasty Harmony are closely aligned from a credit perspective.

The reaffirmed rating is premised on the transaction’s stable cashflow, adequate liquidity and solid projected finance service coverage in line with the required rating thresholds. KP Mukah continued to receive fixed and prompt monthly Availability Charges (ACs) from the Government of Malaysia (through UiTM) amid the COVID-19 pandemic and movement restrictions. This has been key to supporting its repayment obligations. Its maintenance key performance indicator (KPI) averaged 97% in 2020 (concession requirement: 93%) while deductions trended down, with none recorded in 4M 2021 (2020: 4.35%; 2019: 10.95%).

KP Mukah’s finance service coverage ratio (FSCR, with cash balances and calculated in payment months) of 2.00 times as at end-2020 exceeded our expectation of 1.72 times, while Dynasty Harmony’s subordinated FSCR (sub-FSCR, with cash balances and calculated in payment months) was 1.70 times (projected: 1.50 times). The outperformance was largely supported by timely AC receipts, against RAM’s sensitised assumption of a three-month payment delay. We expect KP Mukah and Dynasty Harmony to continue to meet their respective FSCR and sub-FSCR requirements, in line with the current rating, over the remaining tenure of the Sukuk.

The rating is anchored by a tight transaction structure and restrictive covenants to minimise cashflow leakage. As Dynasty Harmony’s Sukuk is subordinated to KP Mukah’s financial obligations, the rating has been notched down from KP Mukah’s implied credit strength (its loan obligations are not rated by RAM). Dynasty Harmony’s sukukholders will receive only profit payments in the first 10 years of the Sukuk. Principal repayments will commence after KP Mukah fully repays its existing loan obligations. 

Profit expense volatility, stemming from KP Mukah’s floating rate liabilities, moderates the rating. While the CA may be terminated if deductions exceed 25% of monthly asset management service charges for three consecutive months, the low to moderate complexity of the maintenance work makes this unlikely. Should termination occur, compensation from the government will only address outstanding liabilities at KP Mukah and therefore will not sufficiently cover sukuk repayments.


Analytical contact
Davinder Kaur Gill
(603) 3385 2525


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 analyses and commentaries, where relevant.

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