RAM Ratings affirms Sasaran Etika’s AA1/Stable issue rating

Published on 30 Apr 2024.

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RAM Ratings has affirmed the AA1/Stable rating of Sasaran Etika Sdn Bhd’s (the Company) RM220 mil Fixed-Rate Serial Bonds (2012/2027). The bonds’ robust debt coverage and credit metrics are sustained by steady concession-based earnings and cash reserves, as well as the Company’s satisfactory performance in maintaining residential hostels and accompanying facilities on the campus of International Islamic University Malaysia (IIUM) Kuantan.

Sasaran Etika holds a 221/2-year concession for the construction and maintenance of the campus facilities in exchange for fixed and timely monthly cash flows. The Company achieved a healthy debt coverage for the review period with debt service coverage ratios (DSCRs)1 of above 1.50 times, commensurate with the AA1 rating. While the transaction’s covenants permit distributions to shareholders, sizeable payouts in the past have resulted in lower accumulated cash reserves, putting pressure on its liquidity buffers under our stressed projections. To ensure the transaction continues to perform at current levels, Sasaran Etika has committed to being mindful of its longer-term cashflow profile and debt coverage measures in determining future distributions.

Timely receipt of monthly Availability Charges from IIUM is crucial as they are the sole source of funds for bond repayments. The Company has so far received timely payments within RAM’s payment delay sensitivity scenario and faces minimal counterparty risk as the Government of Malaysia, via the Ministry of Higher Education, is the ultimate obligor of concession payments. Moreover, penalties for maintenance underperformance have been negligible, given Sasaran Etika’s excellent track record over the last several years. Maintenance is undertaken externally through sister company Nadi Cergas Urus Harta Sdn Bhd. The Company’s asset management services for IIUM are generally deemed non-complex.

Sasaran Etika is entitled to compensation if its concession agreement is terminated, although remote. As with most concession-related companies, Sasaran Etika is exposed to single-project risk, where a force majeure or major operational failure may disrupt its entire operations (usually with no provisions for compensation).

1Calculated on a 12-month rolling basis, semi-annually on each payment date, and exclude the final repayment period.


Analytical contacts
Julian Chan
(603) 3385 2486

Davinder Kaur Gill
(603) 3385 2525

Media contact
Sakinah Arifin
(603) 3385 2500


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

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Ratings on Sasaran Etika Sdn Bhd