RAM Ratings upgrades Malayan Cement’s sukuk to AA1

Published on 13 Feb 2025.

Share Tweet Email

RAM Ratings has upgraded the long-term rating of Malayan Cement Berhad’s (Malayan Cement or the Company) RM5.0 billion Sukuk Murabahah Programme (2022/2052) to AA₁ from AA₃. Concurrently, we have revised its outlook back to Stable from Positive. Its short-term rating remains at P1. 

The upgrade reflects the Company’s significantly stronger than expected financial profile, underpinned by robust demand for cement and concrete products, favourable pricing and enhanced operational efficiencies. These factors bolstered the Company’s credit metrics, aligning them with the higher rating.

Anchored by five integrated cement plants, four grinding stations and a comprehensive logistics network, Malayan Cement remains Malaysia’s largest cement producer, commanding an approximately 65% market share in Peninsular Malaysia. The Company benefits from integration with YTL Corporation Berhad (YTL Corp) – its ultimate parent – leveraging on synergies with the latter’s infrastructure, construction and property development businesses. 

These factors contributed to markedly improved financial results in FY June 2024, seeing Malayan Cement’s top line grow 18% y-o-y to RM4.4 bil and operating profit before depreciation, interest and tax (OPBDIT) surge 58% y-o-y to RM938.8 mil. This positive momentum carried into 1Q FY June 2025, with revenue remaining steady at RM1.2 bil as strong aggregates and concrete sales (+29.3% y-o-y) offset weaker cement sales volumes. Reflecting enhanced operational efficiencies and lower production costs, OPBDIT rose 17.1% y-o-y to RM297.8 mil.

Disciplined capital management and strong earnings accretion led to a significantly stronger balance sheet in fiscal 2024, with total debt reducing to RM3.0 bil as at end-September 2024 (end-June 2024: RM3.2 bil; end-June 2023: RM3.8 bil) and gearing accordingly easing to 0.47 times (end-June 2024: 0.50 times; end-June 2023: 0.64 times). Annualised funds from operations (FFO) debt coverage for 1Q fiscal 2025 stayed sound at 0.34 times (fiscal 2024: 0.34 times; fiscal 2023: 0.16 times), driven by deleveraging amid strong revenue generation. Our sensitised analysis, which assumes annual debt repayment of RM500 mil, indicates that Malayan Cement’s gearing will stay below 0.50 times, with FFO debt coverage increasing to 0.50 times, supporting the rating upgrade.

Looking ahead, Malayan Cement’s performance is anticipated to remain robust, underpinned by Malaysia’s active pipeline of infrastructure projects, urbanisation trends and growing industrial developments. Stabilised input costs, particularly coal prices, will keep the Company’s average selling prices and bottom line stable. 

The issue ratings also benefit from an uplift afforded by parental support under RAM’s methodology for group rating links assessment. This reflects RAM’s view that Malayan Cement benefits from a ‘strong’ relationship with YTL Corp (rated AA₁/Positive by RAM). The Company’s significant contribution to YTL Cement’s performance (FY June 2024 revenue: 82%; profit before tax: 81%) and YTL Cement’s role within YTL Corp’s Cement and Building Materials segment – the second largest after the Utilities segment – underscore this view. 

 

Analytical contacts
Tan Yan Choong
(603) 3385 2502
yanchoong@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 2025 by RAM Rating Services Berhad

Rating Rationale