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RAM Ratings affirms AAA(s) sukuk ratings of Khazanah’s funding conduits
Published on 12 Nov 2024.
RAM Ratings has affirmed the ratings of Islamic securities issued by the funding conduits of Khazanah Nasional Berhad (Khazanah or the Company) – the investment arm of the Government of Malaysia – as listed below:
The suffix (s) indicates that the issue ratings have been enhanced beyond their standalone credit strength, based on Khazanah’s contractual obligation to cover any shortfall faced by the conduits in meeting expected income distributions and capital returns on the sukuk at maturity or upon the occurrence of a dissolution event.
The rating affirmations reflect Khazanah’s integral role in supporting the government through the management of strategic assets and promotion of new economic growth areas with a significant socio-economic impact. Our view that Khazanah’s credit strength aligns with the government’s is anchored on its vital link to the latter and the anticipated extraordinary and timely support it will receive, if in distress. The Company’s recent initiatives, including the acquisition of Malaysia Venture Capital Management Berhad and Penjana Kapital under the Dana Impak programme, and the establishment of the National Funds of Funds, are in keeping with the nation’s goal to strengthen the venture capital ecosystem. Khazanah is also entrusted with spearheading the establishment of a green investment platform in support of the country’s decarbonisation agenda and the coordination of resources and efforts among government-linked investment companies identified under the Ministry of Finance’s GEAR-uP programme to stimulate investment inflows.
Financially, Khazanah’s overall performance was stable, with its five-year time-weighted rate of return (TWRR) on the net asset value of Khazanah’s investment portfolio of 2.9%, primarily driven by its improved performance in global public markets in 2023. This was balanced by lower income to interest coverage ratio of 2.5 times in FY2023 (FY2022: 2.8 times). The Company’s investment portfolio remains diversified across more than 10 sectors, with the share of realisable asset value (RAV) concentrated in the top three sectors reducing to 40.7% as of end-June 2024 from 41.9% a year ago. While the proportion of foreign investments stayed at around 37%, the Company intends to further diversify its portfolio for better resilience.
As a quasi-sovereign entity, Khazanah demonstrates superior financial flexibility and has good access to financial markets, as evidenced by its frequent debt issuances in both domestic and global capital markets. Its liquidity profile remained stable, with its RAV debt coverage at 2.7 times as at end-December 2023 as total extended company debts stood at RM50.2 bil. With the planned privatisation of Malaysia Airports Holdings Berhad, anticipated lower dividend income and lower yields generated by committed national initiatives in the immediate term, we anticipate that further funding may be required, requiring the Company to remain vigilant in its portfolio and financial management.
Analytical contacts
L Nurisya Abdullah
(603) 3385 2492
nurisya@ram.com.my
Tan Han Nee
(603) 3385 2529
hannee@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
