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RAM Ratings affirms Encorp Systembilt’s AA1 sukuk rating
Published on 25 Apr 2025.
RAM Ratings has affirmed the AA1/Stable rating of Encorp Systembilt Sdn Bhd’s (Encorp or the Company) RM1.575 bil Sukuk Murabahah (the Sukuk).
Encorp’s debt servicing ability is expected to remain robust, safeguarded by the steady inflow of monthly concession payments and restrictions on the Company’s activities, costs and distributions. The contracted cash inflows Encorp receives, pursuant to its development of 10,000 units of teachers’ quarters throughout Malaysia (completed in 2004), are also free of performance-related deductions.
The Company’s projected finance service coverage ratios are expected to stay consistently above 1.50 times, commensurate with an AA1 rating. Despite our assumption of delays, concession payments in FY Dec 2024 were timely, coming in within a 31-day average. Cost-wise, our analysis assumes Encorp will pay expenses up to permissible limits, any sums exceeding these limits will be covered by Encorp Berhad (its ultimate parent company), as seen over the past few years. Encorp faces minimal counterparty risk as the government is the ultimate paymaster for concession payments.
As the last tranche of the Sukuk matures three months after the concession expires in February 2028, Encorp’s projected cash balances under our stressed scenario should provide sufficient buffer to meet the final principal repayment. If a default by the Company leads to the termination of the concession – a risk deemed remote – it should be entitled to monthly payments for the rest of the concession term. In the case of a default on the government’s part, the timing and quantum of compensation is uncertain.
Analytical contacts
Lai Jing Wei
(603) 3385 2501
jingwei@ram.com.my
Davinder Kaur Gill
(603) 3385 2525
davinder@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
