RAM Ratings assigns preliminary AA2/Stable rating to Zecon Medivest’s proposed sukuk

Published on 03 Aug 2026.

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RAM Ratings has assigned a preliminary AA2/Stable rating to Zecon Medivest Sdn Bhd’s (Issuer) proposed Islamic Medium-Term Notes of up to RM700 mil (Proposed Sukuk). Wholly owned by Zecon Berhad, the Issuer has no operating activities and will serve as a special purpose vehicle to raise the Proposed Sukuk. The rating reflects the Issuer’s strong capacity to meet scheduled profit and principal payments under a stressed scenario, underpinned by predictable, concession-backed cashflows. 

Zecon Medivest’s debt service is supported by availability and asset-management service charges payable to its sister company, Zecon Medicare Sdn Bhd (the concessionaire), under the long-term concession for Hospital Pakar Kanak-kanak Universiti Kebangsaan Malaysia (HPKK) with the Government of Malaysia/Universiti Kebangsaan Malaysia. 

Under the transaction structure, proceeds from the proposed sukuk are expected to be channelled to Zecon Medicare via its subscription of redeemable unsecured murabahah stocks to be issued by the latter, with scheduled payments from Zecon Medicare to the Issuer to support sukuk debt service. Zecon Berhad is the parent company of the Issuer, the concessionaire (51%, with 49% held by State Financial Secretary Sarawak) and the maintenance service provider, ServeCo Sdn Bhd.

Given the cashflow interdependence and structural linkage, RAM assesses Zecon Medicare and Zecon Medivest as a single economic unit. The rating considers the project’s established operating track record since completion and handover in December 2020 – as reflected in consistently high KPI scores, minimal deductions (average of less than 0.6% of amount billed) and timely receipt of concession payments (within 26-32 days of invoice dates). Under RAM’s stressed assumptions incorporating payment delays, deductions for KPI underperformance and cost inflation, average pre-financing cash flows are projected at RM60 mil annually. The consolidated minimum and average finance service cover ratios (including cash balances on payment dates) of 1.5 times and 6.5 times, respectively, are consistent with an AA2 profile for a complex PFI/PPP project. Nonetheless, principal repayments are expected to rely materially on accumulated cash balances. 

Transaction features to control cashflow leakage and ensure financial discipline, including controlled designated accounts and reserve account with defined payment waterfall, restrictions on additional indebtedness, dividend distributions and budgetary expenses, and security framework, limit discretionary outflows and align operating performance with sukukholder protection. 

However, uncertainty around the final scope of maintenance moderates the rating, pending finalisation of supplemental concession agreements (SCAs). The unexecuted status of the SCAs limit visibility on the operating and cashflow implications on areas such as the KPI and deduction mechanisms related to a still unconfirmed revised list of hospital equipments. Under the terms of the transaction, the execution of the second and third SCAs is subject to there being no material adverse impact on the agreed base case financial model and assigned rating, prior to execution of such supplemental agreements.

Other moderating factors include the issuer’s highly leveraged capital structure, the intercompany arrangements, and the risk that certain termination scenarios will only cover construction-related financing and may not extend to the Proposed Sukuk. Nonetheless, our analysis focuses on the assured stream of concession payments to meet the obligations under the Proposed Sukuk. 

The rating is preliminary and will be finalised upon receipt and review of the final transaction documents, together with satisfactory legal and tax opinions.

 

Analytical contacts
Karin Koh, CFA
(603) 2708 8237
karin@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
© Copyright 2026 by RAM Rating Services Berhad

Rating Rationale: Zecon Medivest Sdn Bhd