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RAM Ratings affirms YTL Corp
Published on 19 Feb 2024.
RAM Ratings has affirmed the AA1 rating of YTL Corporation Berhad’s (YTL Corp or the Group) RM2 bil Medium-Term Notes (MTN) Programme (2013/2038) as well as the AA1/Stable/P1 ratings of its RM5 bil Commercial Papers Programme and MTN Programme (2019/2044).
The ratings reflect YTL Corp’s solid business profile, with diversified business lines and operations in multiple continents. Its sturdy track record in concession businesses, superior liquidity position and strong financial flexibility, which provide financial buffers and leverage headroom, complement its strong business profile. The combined operating cash flow (OCF) to net debt coverage of YTL Corp and its utility arm, YTL Power International Berhad (YTLPI), is projected to remain sound at a minimum 0.60 times in the next couple of years, a level which is supportive of an AA1 rating. The combined ratio for FY June 2023 exceeded our expectations at 0.41 times (FY June 2022: 0.27 times).
Moderating the ratings is the Group’s hefty debt load, about half of which comprises concession- or real estate investment trust-related non-recourse debts. Looking ahead, execution risks stem from expansion into new businesses but we take comfort from the Group’s proven investment capabilities and track record. Further, the Group has a track record of monetising assets, as seen in the disposal of YTLPI’s associate stake in ElectraNet Pty Ltd in fiscal 2022 which yielded net proceeds of almost RM2 bil.
Operating profit before depreciation, interest and tax doubled in FY June 2023 while pre-tax profit leapt 76% to an all-time high of RM2.73 bil, boosted by the stellar performance of YTL Corp’s power generation business in Singapore. Stronger cement earnings and a return to profitability of its hotels post pandemic also contributed to the better profit showing. As at end-June 2023, unencumbered cash reserves under YTLPI and YTL Corp company level were substantial at close to RM8 bil and RM561 mil, respectively. YTL Corp’s asset base, as measured by the net realisable asset value (calculated net of liabilities), is also robust.
While YTL Corp remains focused on infrastructure and utilities as core assets, it has expanded further into technology and renewable energy (solar-powered data centre and digital bank segments, among others) adding further diversification to its investment portfolio. To this end, the Group recently announced a collaboration with US-based technology company, Nvidia Corporation, to build artificial intelligence (AI) infrastructure at its data centre park in Johor, utilising Nvidia’s AI chips and software.
Analytical contacts
Karin Koh, CFA
(603) 3385 2508
karin@ram.com.my
Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
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 2024 by RAM Rating Services Berhad
