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RAM Ratings upgrades Jati Cakerawala’s sukuk to AA3/Stable

Published on 16 Nov 2021.

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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). 

 

Analytical contacts
Lee Jo Yee
(603) 3385 2583
joyee@ram.com.my

Chong Van Nee, CFA
(603) 3385 2482
vannee@ram.com.my

 

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.

Published by RAM Rating Services Berhad
© Copyright 2021 by RAM Rating Services Berhad



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