RAM Ratings revises outlook on Golden Agri’s sukuk to positive

Published on 20 Dec 2022.

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RAM Ratings has revised the outlook on the AA3(s) rating of Golden Assets International Finance Limited’s (Golden Assets) RM5.0 bil Islamic Medium-Term Notes Programme (2012/2027) from stable to positive.  Golden Assets is a funding conduit of Indonesia-based plantation company, Golden Agri-Resources Ltd (GAR or the Group).

The positive outlook is supported by the Group’s improved financial profile which is expected to be maintained even under our stressed CPO price assumptions of RM3,300/MT and RM3,000/MT, respectively, for 2023 and 2024. GAR’s sizeable scale as the second largest planter in the world and its high degree of vertical integration are rating strengths.

Thanks to lofty CPO prices, the Group’s gearing and funds from operations (FFO) debt coverage ratios (both adjusted for readily marketable inventories, RMI) improved significantly in the last 18 month, coming in at 0.52 times and 0.46 times, respectively, in 1H FY Dec 2022 (1H FY Dec 2021: 0.63 times and 0.32 times). We believe GAR’s RMI-adjusted FFO debt coverage will stay supported by still strong CPO prices (above long-term average) and sustain at above 0.30 times in the next two years, while its healthy operating cashflows should enable it to de-gear its balance sheet further. This should allow its RMI-adjusted gearing to ease to between 0.30 times and 0.39 times.

GAR’s operating profit before depreciation, interest and tax surged 72% in FY Dec 2021, increasing another 50% in 1H FY Dec 2022. Both its plantation and downstream businesses contributed to the better showing. Strong CPO prices had mitigated the impact of weaker fresh fruit bunch production (-8% y-o-y) in 1H fiscal 2022. Despite a lower downstream sales volume in the same period (-12% y-o-y) due to Indonesia’s export ban, the segment still registered markedly higher earnings (+82%). This was helped by GAR’s ongoing strategy of shifting its product mix to higher value-added products as well as its overseas distribution network which was not affected by the ban. 

The issue rating reflects GAR’s credit risks in view of the Group’s irrevocable and unconditional undertaking to the Trustee, for the benefit of sukukholders, to fulfil its obligations to Golden Assets to ensure principal and profit payments or any amount falling due under the sukuk programme are met.


Analytical contacts
Wong Ee Loo
(603) 3385 2521

Thong Mun Wai
(603) 3385 2522


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

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