Published on 20 Dec 2022.
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.
Wong Ee Loo
(603) 3385 2521
Thong Mun Wai
(603) 3385 2522
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Published by RAM Rating Services Berhad
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Ratings on Golden Assets International Finance Limited