Published on 16 Nov 2021.
RAM Ratings has upgraded the rating of Jati Cakerawala Sdn Bhd’s (Jati or the Company) RM540 mil Sukuk Murabahah (2013/2023) to AA3/Stable from A1/Stable. The upgrade of the rating is premised on the improvement in Jati’s cashflow coverage to a level commensurate with an AA3 rating.
Jati’s subordinated finance service coverage ratio (sub-FSCR) on the latest repayment date of its sukuk (31 July 2021) stood at 1.51 times, exceeding our earlier projection of 1.42 times. This was made possible by increased cash retention given lower than expected dividend payments of RM18 mil to the Company’s shareholders in FY Sep 2021 (earlier expectation: RM36 mil). Jati’s sub-FSCR is anticipated to remain at a minimum of 1.50 times for the next two years – commensurate with an AA3 rating – despite the maximisation of dividends to the extent permitted by its financial covenants.
Purely an investment holding company, Jati relies solely on dividends from Teknologi Tenaga Perlis Consortium Sdn Bhd (TTPC) – its 80% owned subsidiary – to fulfil its own obligations. Jati’s sukuk obligations are subordinated to TTPC’s RM835 mil Sukuk Murabahah (2013/2023) (rated AA1/Stable) in terms of cashflow priority and security as they rank after TTPC’s obligations in terms of priority of payment.
TTPC is an independent power producer that owns and operates a 650MW combined-cycle gas turbine power plant in Perlis. TTPC can only declare dividends upon meeting its own financing obligations and the necessary cash-trap requirements stipulated by its financing covenants. Distributions from TTPC to Jati stayed healthy during the review period owing to TTPC’s commendable operational metrics and cashflow generating ability. This is underlined by the AA1/Stable rating of TTPC’s sukuk. Jati received RM87.8 mil in dividends from TTPC in FY Sep 2021 (FY Sep 2020: RM96.6 mil).
Lee Jo Yee
(603) 3385 2583
Chong Van Nee, CFA
(603) 3385 2482
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Ratings on Jati Cakerawala Sdn Bhd