RAM Ratings reaffirms AAA(s) ratings of sukuk issued by Khazanah’s funding conduits

Published on 02 Dec 2022.

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RAM Ratings has reaffirmed the ratings of Islamic securities issued by the funding conduits of Khazanah Nasional Berhad (the Company) – the investment arm of the Government of Malaysia – as follows:





Rantau Abang Capital Berhad

RM7.0 bil Islamic Medium-Term Notes (MTN) Sukuk Musyarakah Programme (2006/2041)



Danga Capital Berhad

RM10.0 bil Islamic Securities Programme (2009/2044)



Ihsan Sukuk Berhad

RM1.0 bil Islamic MTN Sukuk Ihsan Programme (2015/2040)



Danum Capital Berhad

RM20.0 bil Islamic MTN Sukuk Danum Programme (2019/2069)




The suffix (s) indicates that the issue ratings have been enhanced beyond their standalone credit strength. This is based on Khazanah’s contractual obligation to top up any shortfall faced by its conduits in meeting expected income distributions and capital returns on the sukuk upon their maturity or the occurrence of a dissolution event. In the case of Ihsan Sukuk Berhad, Khazanah’s commitment to meet either full or partial repayment of the sukuk (reduced by a pre-determined percentage) is subject to the performance of the underlying sustainable and responsible investment project vis-à-vis targeted indicators.

The rating action reflects Khazanah’s important role and critical link to the government. The Company has a long-term mandate of investing to grow the nation’s wealth, apart from safeguarding and supporting key strategic assets and spurring new growth areas. Khazanah’s crucial function and anticipated support from the government in times of financial distress, should the need arise, underscore our view that the Company’s credit strength mirrors that of the latter.

To improve the resilience and returns of its investment portfolio, Khazanah aims to gradually diversify its assets by sector and geographically, and grow listed investments. Notably, exposure of its investment portfolio to the top three sectors as at end-June 2022 reduced to 45% of realisable asset value (RAV), while the proportion of foreign investments grew to a still modest 33% (end-December 2020: 48% and 28%). While dividend income over interest coverage softened to 1.5 times in fiscal 2021 (fiscal 2020: 2.7 times), we expect that it will stay more than adequate to cover finance costs, considering the quality of Khazanah’s assets and financial policies.

Khazanah’s earnings could become more volatile, particularly if the Company aggressively diversifies and grows its investments. We however envisage this process to be gradual and carefully measured, as demonstrated in the past. Khazanah’s commercial fund generated strong returns on net asset values last year, which contributed to a three-year time-weighted rate of return of 7%, on track to the Company’s long-term five-year target.

As the government’s investment arm, Khazanah has superior financial flexibility, as seen in frequent debt issuances in both local and global capital markets. Its issuances, including RM2 bil of sukuk raised in June 2022, stay well received and over-subscribed. Total extended company debts (including that of investment and funding vehicles) inched up to RM49.96 bil as at end-June 2022, with net gearing increased to 1.23 times on account of a lower cash level (end-December 2021: RM48.48 bil and 1.19 times). We expect the Company to remain guided by its long-term target of keeping a portfolio RAV to total liabilities cover of above 3.0 times (end-December 2021: 2.7 times).


Analytical contacts
Ben Inn
(603) 3385 2510

Tan Han Nee
(603) 3385 2529


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
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