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RAM Ratings affirms UEM’s sukuk rating at AA1(s)/Stable
Published on 04 Dec 2024.
RAM Ratings has affirmed the AA1(s)/Stable rating of UEM Group Berhad’s (UEM or the Group) RM7.0 bil Sukuk Wakalah Programme, issued through wholly owned funding vehicle, UEM Olive Capital Berhad (UEM Olive).
The affirmation reflects our expectations that UEM will continue to enjoy a ‘high’ likelihood of extraordinary support from its parent, Khazanah Nasional Berhad (Khazanah). Our assessment takes note of UEM’s designated role as Khazanah’s infrastructure and green investment arm. Khazanah’s transfer of its 32.99% stake in Malaysia Airports Holdings Berhad (MAHB) to a wholly owned subsidiary of UEM in May 2024 reinforces this role. As a fully-owned subsidiary of Khazanah, UEM also holds other key strategic assets of the government.
UEM’s standalone credit profile remains anchored by its diversified business profile and leading market positions of its operating entities in the property, cement, asset and facility management (AFM) and airport operation sectors. The Group’s core pre-tax profit improved to a respective RM323.93 mil and RM283.95 mil in FY Dec 2023 and 1H FY Dec 2024, mainly attributed to the turnaround of its cement arm. Its adjusted consolidated operating cashflow debt coverage (excluding concession-related debts) was largely unchanged at 0.10 times last year (fiscal 2022: 0.11 times). Going forward, the ratio is expected to strengthen on the back of better earnings prospects of the Group’s property, cement and AFM operations.
UEM’s company-level cashflow interest coverage ratio is expected to hover around 4 times in the next few years (1H FY Dec 2024: 4.7 times) following a recent RM600 mil drawdown on the sukuk programme. Company-level gearing is estimated to remain below 0.20 times (end-June 2024: 0.07 times). These credit metrics, coupled with the strong business profile, are still supportive of the Group’s rating.
The (s) modifier attached to UEM Olive’s issue rating reflects the Group’s credit profile as the Sukuk Wakalah structure provides recourse to UEM by virtue of its obligations under a purchase undertaking. UEM is also obligated to pay the deferred sale price in its capacity as the buyer of commodities under the Commodity Murabahah Investment backing UEM Olive’s IMTN programme.
Analytical contacts
Karin Koh, CFA
(603) 3385 2508
karin@ram.com.my
Thong Mun Wai
(603) 3385 2522
munwai@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
