RAM Ratings assigns AA1(bg) rating to Agroto’s proposed RM100 mil sukuk tranche, reaffirms rating of existing tranche

Published on 12 Apr 2023.

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RAM Ratings has assigned an AA1(bg)/Stable rating to the proposed RM100 mil sukuk (to be issued in one or more tranches) under Agroto Business (M) Sdn Bhd’s (Agroto or the Group) ASEAN Sustainability SRI Sukuk Programme of up to RM300 mil (2021/2036). The rating of an earlier RM200 mil tranche has been reaffirmed. 


Rating Action


 ASEAN Sustainability SRI Sukuk Programme of up to RM300 mil (2021/2036)

 RM200 million 5-year Tranche (2021/2026)

 Proposed RM100 million sukuk (to be issued in one or more tranches)






The ratings are premised on an irrevocable and unconditional guarantee extended by Sabah Development Bank Berhad (rated AA1/Stable/P1) which enhances the credit standing of the sukuk beyond Agroto’s standalone credit strength. Agroto is a notable vegetable grower in Malaysia, with 110 acres of planted area in Kinta Highlands, Perak. The Group’s modern farming methods deliver superior yields and product quality, which have allowed it to obtain major certification standards that are important to established retail and restaurant chains. 

In FY Dec 2022, Agroto’s revenue surged 33.1%, backed by an increased sales volume (+17.6%) and average selling prices (+5%). The Group’s production and sales in fiscal 2021 were impacted by pandemic-induced lockdowns. The upward revision of selling prices had cushioned the higher cost impact from the rise in the minimum wage, packaging materials and fertiliser costs, translating into Agroto’s first positive operating profit and a narrower pre-tax loss. The pre-tax loss continues to reflect the Group’s lack of scale. Planned farm expansion is expected to improve its profitability going forward.

As at end-December 2022, the Group’s gearing ratio climbed to 1.00 time (end-December 2021: 0.86 times) as equity was eroded by the widening retained loss. We expect gearing to weaken further to around 1.6 times in fiscal 2023 following the drawdown of the proposed RM100 mil tranche to fund capacity expansion. Agroto’s cash generating ability, while having improved in fiscal 2022, remains very weak. Should the Group not generate sufficient cashflow to meet its financing obligations, we expect shareholder advances to be forthcoming to alleviate liquidity pressure. 

Excluding the bank guarantee, the Group has a weak standalone credit profile. Intense competition within the fragmented vegetable industry, Agroto’s limited production capacity and high leverage have strained its operating and financial performance. Agroto’s credit profile is also tempered by high customer and product concentration. 


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 2023 by RAM Rating Services Berhad


Rating Rationale

Ratings on Agroto Business (M) Sdn Bhd