RAM Ratings: Batu Kawan’s AA1 rating under review from recent corporate acquisitions and divestment plan

Published on 30 Jun 2026.

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RAM Ratings is monitoring Batu Kawan Berhad (BKB or the Group) following several recently announced corporate exercises. These include BKB’s acquisition of a stake in MKH Berhad (MKH) and the proposed conditional mandatory take-over offer for the remaining MKH shares; a possible mandatory take-over offer for the remaining shares in MKH’s listed plantation subsidiary, MKH Oil Palm (East Kalimantan) Berhad (MKHOP); and the proposed disposal of the Group’s entire interest in its industrial chemicals subsidiary, Chemical Company of Malaysia Berhad (CCM). The rating on BKB’s RM1.0 bil Islamic Medium-Term Notes Programme (2022/2043) was affirmed at AA₁/Stable in November 2025.

At this stage, the announced exercises are preliminarily viewed to be broadly neutral to BKB’s rating. Its core subsidiary, Kuala Lumpur Kepong Berhad (KLK) has contributed more than 95% of consolidated revenue and operating profit before depreciation, interest and tax over the past 3 years, and the transactions are modest relative to the Group’s overall scale. That said, the MKH-related acquisition and proposed/possible take-over offers could add up to RM1.3 bil of new borrowings, assuming full acceptances. While this incremental debt is, on its own, manageable, it would further delay the deleveraging that RAM had previously expected by fiscal 2027. As it stands, the Group's total debt and gearing remained above our earlier expectations at RM12.82 bil and 0.76 times, respectively, as at end-March 2026, largely due to KLK's working capital needs. The additional borrowings would therefore be added onto an already elevated base, leaving less headroom than previously assumed.

On balance, the MKH-related corporate exercises will potentially give the Group control of an established property developer and broaden its exposure beyond plantation and manufacturing activities. While we expect near term earnings accretion to be modest, MKH’s land bank may be unlocked progressively over the medium term if development execution and market conditions remain favourable. As of 9 June 2026, BKB had acquired 29.6% of MKH and proposed to raise its stake to 47.7%, at RM2.00 per MKH share, subject to shareholders’ approval. If approved, the acquisition will trigger a proposed conditional mandatory take-over offer for the remaining MKH shares at the same offer price.

As MKH owns 65.3% of MKHOP, BKB may be required to extend a mandatory take-over offer for the remaining MKHOP shares it does not already own, subject to BKB securing the relevant acceptance threshold for MKH. MKHOP owns approximately 18,205 hectares in East Kalimantan, of which around 17,009 hectares are planted. This could complement the KLK’s existing Indonesian plantation footprint, although the credit impact will depend on the final acceptance level, funding mix, acquisition economics and integration risks.

Separately, BKB’s proposed disposal of CCM to related party TMK Chemical Berhad (TMK) would mark the Group’s exit from directly held industrial chemical operations, although it would retain indirect exposure through an expected minority stake of around 20% in the enlarged TMK group. The indicative RM920.0 mil consideration, on a cash-free, debt-free basis, is expected to be satisfied through a mix of cash and new TMK shares. The disposal would reduce BKB's business diversity, though partially offset by cash proceeds and resulting financial flexibility. RAM will assess the net credit impact once the transaction terms, proceeds utilisation and post-disposal group structure are finalised.

Our assessment of the net credit impact on BKB’s overall risk profile is still preliminary at this juncture, given the early stage of the exercises, uncertainty over the acceptance levels for the proposed/possible mandatary take-over offers for MKH and MKHOP, and the absence of firm details for the disposal of CCM. We expect to conclude our rating review of BKB within the next three months, when there should be more clarity on the transactions, the Group’s funding requirements and strategies, and the Group’s projected financial profile reflecting more recent operating results and market assumptions, and will issue a market update upon completion of the review. 

 

Analytical contact
Karin Koh, CFA
(603) 2708 8237
karin@ram.com.my

Kee Hwai Zher
(603) 2708 8259
hwaizher.kee@ram.com.my

Thong Mun Wai
(603) 2708 8255
munwai@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my

 

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