RAM: YTL Corp and YTLPI ratings unaffected by Ranhill Utilities acquisition, to benefit from potential synergies

Published on 10 Jun 2024.

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YTL Power International Berhad’s (YTLPI) acquisition of a 31.42% stake in Ranhill Utilities Berhad (Ranhill Utilities), via its 70%-owned SIPP Power Sdn Bhd, will not affect the respective AA1/stable ratings of YTLPI and those of its parent, YTL Corporation Berhad (YTL Corp), given the headroom in their existing ratings and limited outlay of this investment. The acquisition cost of RM405.18 mil was paid via YTLPI’s cash reserves, raising YTLPI’s shareholding in Ranhill Utilities from 21.77% to approximately 53.19%. 

This triggers a mandatory takeover offer for the rest of the shares that it does not already own, expected to conclude in 3Q 2024. Even after considering a cash outlay of up to RM1.01 bil (assuming full take-up of the mandatory offer) without any corresponding cash inflows from the new acquisition, YTLPI and YTL Corp’s combined company-level debt coverage levels, as measured by operating cashflow to net debt coverage, are expected to remain within the minimum projected levels of 0.80 times and 0.60 times in the near term.  The entities’ liquidity and financial position remain strong. 

Operationally, RAM views the acquisition as strategic and poised to bring synergistic benefits to YTLPI’s core multi-utility and concession businesses. Ranhill Utilities is the sole water operator in Johor and the largest independent power producer in Sabah, with interest in large scale solar project through its first solar photovoltaic power plant in Perak. The earnings impact of the acquisition is, however, expected to be modest. In FY Dec 2023, Ranhill Utilities generated revenue and a pre-tax profit of RM2.28 bil and RM147.84 mil, respectively – about 10% and 6% of YTLPI’s respective top line and pre-tax earnings for fiscal 2023. RAM presently has a AA3/Stable on Ranhill Solar Ventures Sdn Bhd’s project financed debt ratings (Table 1).

RAM will continue to monitor the transaction through closing and provide updates if necessary.


Table 1: Issue ratings of YTL Corp, YTLPI and Ranhill Solar Ventures

* Ranhill Solar Ventures is indirectly wholly owned by Ranhill Utilities. Tranche 1 of its sukuk is a project-finance debt, solely reliant on cashflows
from a solar plant owned by sister company, Ranhill Solar I Sdn Bhd, for sukuk repayments.


Analytical contacts
Karin Koh, CFA
(603) 3385 2508

Davinder Kaur Gill
(603) 3385 2525

Media contact
Sakinah Arifin
(603) 3385 2500


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