RAM Ratings affirms Dynasty Harmony’s AA3/Stable issue rating

Published on 24 Aug 2023.

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RAM Ratings has affirmed the AA3/Stable rating of the RM165.0 mil Islamic Medium-Term Notes (2018/2033) (the Sukuk) under Dynasty Harmony Sdn Bhd’s (Dynasty Harmony) RM300.0 mil Sukuk Programme (2018/2036). The affirmation is premised on the transaction’s stable cash flow, adequate liquidity and healthy finance service coverage as measured by the subordinated finance service coverage ratio (sub-FSCR).

Dynasty Harmony is a wholly owned funding vehicle of GFM Services Berhad (GFM Services) and a sister company of KP Mukah Development Sdn Bhd (KP Mukah). Its sukuk is subordinated to KP Mukah’s financing facility from Bank Pembangunan Malaysia Berhad (BPMB). To service dues under the Sukuk, Dynasty Harmony is entirely dependent on dividend distributions from KP Mukah, after the latter meets its own operational and financial obligations. KP Mukah is the concession holder for the development and maintenance of the Universiti Teknologi MARA campus in Mukah, Sarawak. 

Dynasty Harmony’s sub-FSCR came in at 1.79 times as at end-December 2022, outperforming our expectation of 1.50 times owing to lower funding costs at KP Mukah (the BPMB facility has a variable financing rate), timely concession receipts and minimal maintenance service charge (MSC) deductions. Enjoying stable, timely and predictable concession cash flows, KP Mukah’s track record is commendable, with MSC deductions down to negligible levels in recent years. We expect KP Mukah to channel an average of RM25.0 mil annually to Dynasty Harmony for the remaining tenure of the Sukuk.

Accordingly, the transaction’s FSCR and sub-FSCR at KP Mukah and DHSB, respectively, will stand above the rating thresholds of 1.50 times and 1.20 times, respectively. A tight financing structure and restrictive covenants, including limitations on cost escalations and distributions to Dynasty Harmony shareholders, reduce the risk of cash leaks. 

As any compensation for concession termination at KP Mukah is not linked to the holders of DHSB’s sukuk, the transaction is exposed to termination risk. In the unlikely event of a default by KP Mukah, compensation from the government will only address the BPMB financing facility provided to KP Mukah. Holders of Dynasty Harmony’s sukuk may pursue recovery, though limited, via advances extended to GFM Services.


Analytical contacts
Liew Kar Ling
(603) 3385 2586

Davinder Kaur Gill
(603) 3385 2525


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

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