RAM Ratings affirms AAA(s) ratings of sukuk issued by Khazanah’s funding conduits

Published on 27 Oct 2023.

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RAM Ratings has affirmed the ratings of Islamic securities issued by the funding conduits of Khazanah Nasional Berhad (the Company) – the investment arm of the Government of Malaysia – as follows:



The suffix (s) indicates that the issue ratings have been enhanced beyond the standalone credit strength of the issuers. This is based on Khazanah’s contractual obligation to top up any shortfall faced by its funding conduits in meeting expected income distributions and capital returns on the sukuk upon their maturity or the occurrence of a dissolution event. In the case of Ihsan Sukuk Berhad, Khazanah’s commitment to meet either full or partial repayment of the sukuk (reduced by a pre-determined percentage) is subject to the performance of the underlying sustainable and responsible investment project vis-à-vis targeted indicators.

The rating affirmations reflect our belief that Khazanah’s important role and critical link to the government are still intact, and extraordinary and timely support remains forthcoming. Our view that the Company’s credit strength mirrors the government’s is also underscored by its long-term mandate to grow the nation’s wealth. This includes its most recent tasks of spurring new economic growth areas with a greater socio-economic impact post COVID-19 pandemic. Notably, Khazanah was given the role of spearheading a new green investment platform to drive the country’s decarbonisation agenda and upskill Malaysians for the green sector. 

In 2022, the four-year time-weighted rate of return on the net asset value of Khazanah’s investment portfolio slipped to 2.2%, largely tempered by global market weaknesses. Portfolio diversification, if improved at a measured pace, should help reduce concentration risk and volatility in overall portfolio valuation, enabling the Company to achieve its five-year target of consumer price index +3%. The top three sectors’ share of portfolio realisable asset value (RAV) eased further to 41.9% as at end-June 2023 while the proportion of foreign investments expanded, albeit remaining modest at 37.2% (end-June 2022: 44.8% and 32.7%, respectively). Dividend income to interest coverage jumped to 2.8 times in FY December 2022 (FY December 2021: 1.7 times) – partly due to bumper dividends from a subsidiary – but should stay more than adequate to cover the Company’s finance costs in the near term.

Khazanah has superior financial flexibility, as seen in its frequent debt issuances in both local and global capital markets. The Company’s issuance of USD1.5 bil of sukuk and conventional bonds in May 2023 was oversubscribed, leading to more favourable pricing and the extension of its debt maturities. Total extended company debts inched up to RM51.03 bil as at end-June 2023, although net gearing was a better 0.98 times owing to a healthier cash balance (end-June 2022: RM49.96 bil and 1.23 times, respectively). Despite a slightly narrower portfolio RAV debt cover of 2.7 times as at end-December 2022 compared to 2.8 times a year earlier, we expect the Company to remain guided by its long-term target of keeping the ratio above 3.0 times.


Analytical contacts
Ben Inn
(603) 3385 2510

Tan Han Nee
(603) 3385 2529


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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© Copyright 2023 by RAM Rating Services Berhad

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