RAM Ratings upgrades UEM’s sukuk to AA1/Stable

Published on 06 Sep 2023.

Share Tweet Email

RAM Ratings has upgraded from AA2/Stable to AA1/Stable the 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 (United Growth). We have also assigned an AA1(s)/Stable rating to the proposed IMTN programme of up to RM7.0 bil under another funding vehicle, UEM Olive Capital Berhad (UEM Olive Capital), which is a wholly owned subsidiary of UEM. 

The upgrade reflects a stronger government support uplift, given a ‘high’ likelihood of extraordinary support (previously assessed to be ‘moderately high’) from Khazanah Nasional Berhad (Khazanah) – UEM’s parent and Malaysia’s sovereign wealth fund. 

RAM has changed our view in our assessment of UEM’s role as a government-linked entity, and now deem it to be very important to Khazanah. The Group is seen as more integral to support the government’s shift to a high-value green economy as outlined by the National Energy Transition Roadmap (NETR). Khazanah, as a champion of an integrated Renewable Energy (RE) Zone under the NETR, has identified UEM as its green investment vehicle. The Group will be tasked to attract investments in green sectors to deliver the fund’s societal, strategic and financial mandates, drive Malaysia’s decarbonisation agenda and upskill Malaysians in green sectors over the long term. Khazanah’s ownership of its sustainable energy arm, Cenergi SEA Berhad (Cenergi), was recently consolidated under UEM’s umbrella of companies. Cenergi’s extensive related experience and capabilities as the biggest grid-connected palm oil mill effluent biogas provider under Malaysia’s Feed-in-Tariff scheme, make it a valuable addition to the Group. 

In conjunction with the launch of the NETR, UEM signed a memorandum of understanding with several partners for the development of a 1 gigawatt solar photovoltaic (PV) plant and a RE industrial park. The plant will be an integral piece of the RE Zone – one of 10 flagship projects under the NETR. These developments raise UEM’s prominence in Khazanah’s and the government’s agenda, especially in view of the fund’s role in deploying resources to spur new growth areas that will provide a greater socio-economic impact. UEM also continues to hold key strategic assets of the government, maintaining a very strong relationship with Khazanah via the fund’s full ownership of the Group and representation on the Group’s board. 

UEM’s standalone credit profile is well supported by core businesses under UEM Edgenta Berhad (UEM Edgenta) and UEM Sunrise Berhad (UEM Sunrise), notwithstanding its more moderate business strength following the restructuring of the Group’s toll subsidiary and periodic weakness in consolidated debt coverage levels. Both entities are leading players in their respective industries, with established track records and good franchises. UEM Sunrise and UEM Edgenta registered better performances coming out of the pandemic in fiscal 2022, a trend that is expected to be sustained. UEM’s company-level metrics are also healthy, keeping it in a net-cash position. 

The ratings of United Growth and UEM Olive Capital are linked to the credit profile of the Group as the Islamic structures of the respective IMTN programmes provide recourse to UEM by virtue of its obligations under a purchase undertaking, in addition to UEM’s obligation to pay the deferred sale price in its capacity as the buyer of commodities under the Commodity Murabahah Investment under UEM Olive Capital’s IMTN programme. 


Analytical contacts
Karin Koh, CFA
(603) 3385 2508

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 United Growth Berhad