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RAM Ratings affirms SEP
Published on 18 Sep 2025.
RAM Ratings has affirmed its AA1/Stable rating of SEP Resources (M) Sdn Bhd’s (SEP or the Company) RM185 mil ASEAN Sustainability SRI Sukuk Wakalah (2024/2036) (SRI Sukuk).
The affirmation is premised on the transaction’s strong credit standing and healthy debt coverage indicators, commensurate with the rating. Coupled with stringent cash retention features which disallow distributions to shareholders, the Company’s finance service coverage ratios (FSCRs) are projected to register at a minimum and average 1.72 times and 2.20 times, respectively, for the remaining tenure of the SRI Sukuk.
As an intermediate investment holding company with no business of its own, SEP’s repayment of the SRI Sukuk relies on concession cash flows from its wholly owned subsidiary, Budaya Positif Sdn Bhd (BPSB). BPSB holds a 22.5-year concession for the development and maintenance of student hostels in Padang Siding, Perlis. The transaction includes covenants, limitations and intercompany financing arrangements to facilitate the flow of monies between the two entities. As such, we view SEP and Budaya Positif as a single economic entity from a rating perspective.
BPSB’s operating performance remains robust, with an average monthly key performance indicator score of 88% in 2024, and negligible deductions (less than 1% of annual Maintenance Service Charges received). The risk of non-performance is considered low, given the non-complex nature of hostel maintenance work.
SEP’s debt coverage is bolstered by cash reserves of RM49.5 mil as at end-March 2025 and projected annual pre-financing cash flows of RM20 mil. This strong financial profile is expected to be maintained even under RAM’s stressed assumptions, which factor a three-month Availability Charge payment delay and 5% annual increase in operating expenditures. Structural features that limit indebtedness and distribution to shareholders further support the rating by minimising risk of cashflow leakages.
Balancing these strengths is SEP’s highly leveraged capital structure and the remote risk of the concession’s termination. In the event of termination, the corporate guarantee extended by Pesona Metro Holdings Berhad - which owns 70% of SEP – may provide financial relief. Pesona Metro Holdings is a mid-sized construction, manufacturing and trading company listed on Bursa Malaysia.
Analytical contacts
Neo Xue Wei, CFA
(603) 2708 8241
xuewei@ram.com.my
Davinder Kaur Gill
(603) 2708 8220
davinder@ram.com.my
Media contact
Sakinah Arifin
(603) 2708 8212
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
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