Published on 10 Nov 2023.
RAM Ratings has upgraded the rating of Golden Assets International Finance Limited’s (Golden Assets) RM5 bil Islamic Medium Term Notes Programme (2012/2027) to AA2(s) from AA3(s) and revised the positive outlook on the rating to stable. Golden Assets is a funding conduit of Indonesia-based plantation company, Golden Agri-Resources Ltd (GAR or the Group).
The upgrade is supported by GAR’s strong business position as the world’s second largest planter and its high degree of vertical integration as well as the Group’s ability to maintain solid credit metrics commensurate with an AA2 rating.
As at end-June 2023, GAR’s gearing ratio (adjusted for readily marketable inventories and cash pledged for repayment of borrowings) was an improved 0.41 times (end-June 2022: 0.52 times) after debts were pared down. Boosted by lofty crude palm oil (CPO) prices, the Group’s adjusted funds from operations debt cover has been very strong in the past two years at 0.39 times and 0.76 times, respectively, in FY Dec 2021 and FY Dec 2022. Healthy cash flows from still high CPO prices, coupled with moderate capital expenditure and investment sums, should allow for further deleveraging, sustaining debt coverage at above 0.30 times in the next two years.
GAR’s operating profit before depreciation, interest and tax jumped 69.4% to a record high of USD1.9 bil in FY Dec 2022 (FY Dec 2021: USD1.1 bil), outperforming our expectations owing to stable upstream (+3%) and stellar downstream (+135%) earnings. Like other planters, GAR reported y-o-y weaker results in 1H FY Dec 2023 as the price of CPO eased from a peak. Diminished fresh fruit bunch production (-7%) due to replanting and a slightly lower profit contribution from the downstream segment (-10%) – albeit better than peers’ – are also responsible for the weaker showing. In the near term, reduced cost pressure from falling fertiliser prices should improve GAR’s earnings. Higher productivity following ongoing replanting would also lower unit costs in the longer term.
The issue rating reflects GAR’s credit risks in view of the Group’s irrevocable and unconditional undertaking to the Trustee, for the benefit of sukukholders, to fulfil its obligations to Golden Assets to ensure principal and profit payments or any amount falling due under the sukuk programme are met.
Wong Ee Loo
(603) 3385 2521
Thong Mun Wai
(603) 3385 2522
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Published by RAM Rating Services Berhad
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Ratings on Golden Assets International Finance Limited