RAM Ratings reaffirms AA2 rating of UEM’s sukuk

Published on 18 Jan 2023.

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RAM Ratings has reaffirmed the AA2/Stable rating of UEM Group Berhad’s (UEM or the Group) RM2.2 bil Islamic Medium Term Notes (IMTN) Programme (2012/2042), issued through funding vehicle United Growth Berhad. 

UEM’s credit profile remains commensurate with its current rating, notwithstanding its more moderate business strength and ongoing weakness in cashflow debt coverage. The rating continues to incorporate our expectation of government support, premised on UEM’s strong links with Khazanah Nasional Berhad – Malaysia’s sovereign wealth fund – and the Group’s role as a custodian of key strategic national assets.

Long-drawn negotiations on Projek Lebuhraya Usahasama Berhad’s (PLUS, ultimately 51%-owned by UEM via its shareholding in PLUS Malaysia Berhad (PMB)) toll restructuring exercise have been concluded, with supplementary concession agreements inked in October 2022. The concession period of all PLUS highways has been extended to 2058, as compensation for the government’s decision to reduce highway tolls by 18%. Under the toll restructuring terms approved by the government, PLUS is restricted from making dividend payments until 2038. Both PLUS’s ultimate shareholders, UEM and the Employees’ Provident Fund, will instead be entitled to an RM8 bil one-off distribution (via a RM8 bil sukuk issuance by PLUS) - essentially realising most of their investment value in PLUS upfront. 

UEM’s share of distribution (approximately RM4 bil) is expected to be substantially upstreamed to Khazanah. This will reduce UEM’s cashflow diversity as PMB had been a material and relatively stable cashflow contributor to the Group. Our projections assume that none of the RM4 bil sukuk from the immediate value realisation of the Group’s investment in PLUS is retained at UEM.

At the consolidated level, without any offset for the loss of yearly dividends from PLUS, the Group’s adjusted operating cashflow debt coverage will stay strained at around 0.05 times going forward (FY Dec 2021: 0.01 times). This factor is balanced by minimal financial risk at the company level, given UEM’s company-level cash buffers and modest debt load. While less diverse than before, UEM’s key subsidiaries – UEM Edgenta Berhad and UEM Sunrise Berhad – continue to anchor the Group’s credit profile. Both UEM Edgenta and UEM Sunrise are dominant players in their respective industries, with established operational track records and good franchises. UEM is also a well-known name in the infrastructure space and serves as Khazanah’s infrastructure platform. 

The rating of United Growth Berhad is linked to the credit profile of the Group as the former’s Islamic structure provides recourse to UEM by virtue of its obligations under a purchase undertaking. 


Analytical contacts
Amy Lo 
(603) 3385 2509

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.

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