RAM Ratings reaffirms AAA(s) issue ratings of Aquasar Capital and Infracap Resources

Published on 12 Jul 2022.

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RAM Ratings has reaffirmed the AAA(s)/Stable ratings of Aquasar Capital Sdn Bhd’s RM1,500 million Sukuk Murabahah Programme (2014/2029) and Infracap Resources Sdn Bhd’s RM15 billion Sukuk Murabahah Programme (2021/2041). 

Aquasar Capital and Infracap Resources act as the Sarawak government’s funding conduits for various infrastructure development projects. Although the state government has not extended an explicit guarantee on the respective sukuk to either special-purpose vehicle, the issue ratings reflect Sarawak’s credit strength, given that periodic principal and profit payments are borne by the state through annual budgetary appropriation. 

The reaffirmation of the ratings is based on Sarawak’s strong financial position, underpinned by ample fiscal reserves. These reserves provide comfortable coverage of the state’s hefty total adjusted debts and allow significant policy space to enact the state government’s current development strategies.

Sarawak’s fiscal revenue is the highest of all Malaysian states’, with large receipts from (1) hydrocarbon royalties, (2) dividends on investments in downstream oil and gas companies, and (3) additional revenue sources provided for by the Federal Constitution such as duties and sales taxes. The revenue upside for the state government is expected to be significant in 2022 as the global oil price markedly outperformed the state’s budget assumption of USD70 per barrel in the first half of the year. 

Sarawak’s economic rebound is robust compared to peers, underscored by rapid job creation and normalisation of mobility indicators in 2021. Over the long term, the successful implementation of Sarawak’s Post-Covid Development Strategy 2030 would help resolve existing developmental concerns.

The ratings may come under pressure in the event of persistently low commodity prices and/or a significant uptick in committed debt and liabilities that materially impacts Sarawak’s fiscal position. The state’s ambitious medium-term development programme may require funding in the future. In its management of liabilities, we take cognisance of the state’s discipline in fiscal oversight.

Analytical contact
Jason Fong
(603) 3385 2616

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 2022 by RAM Rating Services Berhad


Rating Rationale

Ratings on Aquasar Capital Sdn.Bhd.