RAM Ratings has reaffirmed the AAA(s)/stable rating of Ihsan Sukuk Berhad's RM1 billion Sukuk Ihsan Programme. Ihsan Sukuk, a funding conduit of Khazanah Nasional Berhad (the Company), had been incorporated to raise capital for the purpose of supporting its corporate social responsibility (CSR) efforts. The first RM100 million issue of Sukuk Ihsan is based on the Islamic principle of Wakalah; the proceeds had been used to purchase eligible sukuk investments. Khazanah had, in turn, used the proceeds to fund a Shariah-compliant eligible sustainable and responsible investment (SRI) project, i.e. Yayasan AMIR's Trust Schools Programme.
The rating reflects the credit strength of Khazanah, given its commitment to pay the Deferred Sale Price pursuant to the purchase order of Khazanah (as the Buyer), as well as its role as the obligor under the Purchase Undertaking to buy the sukuk holders' interests in the sukuk investments. RAM views Khazanah as an extension of the Government of Malaysia (GOM) and we therefore equate the Company's rating to that of the GOM.
Khazanah recorded a 7.7% y-o-y growth in its realisable asset value (RAV) to RM145.5 billion as at end-December 2014, despite a more challenging economic environment. The resilient growth was largely driven by the Company's investment portfolio, which comprises some of the country's largest listed GLCs operating in stable and defensive industries - its key dividend income contributors. The portfolio is also well diversified by sector and, increasingly, geographical exposure.
In fiscal 2014, the annual dividend yield from Khazanah's listed domestic investee companies normalised to 3.45% (fiscal 2013: 5.47%), subsequent to around RM2.5 billion of special dividends from UEM Group Berhad and Valuecap Sdn Bhd in fiscal 2013. As a result, its top line descended to RM5.8 billion last year (fiscal 2013: RM7.1 billion). Coupled with a RM1.7 billion investment write-down that had mainly stemmed from Malaysian Airline System Berhad (MAS), Khazanah's pre-tax profit more than halved to RM1 billion (fiscal 2013: RM2.5 billion). In the near term, its dividend income may be more subdued amid the absence of any further special dividend and tighter economic conditions. With Khazanah spearheading the turnaround of MAS, we anticipate the financial assistance to keep weighing on the Company's profitability and balance sheet, before MAS' targeted relisting in 5 years.
Notably, Khazanah's debt load had increased to RM35.8 billion as at end-December 2014 (fiscal 2013: RM32.0 billion). Along with its weaker bottom line, its gearing and OPBDIT debt cover ratios weakened to a respective 1.28 and 0.14 times (end-fiscal 2013: 1.16 and 0.20 times). As at end-May 2015, it had geared up further to RM38.8 billion. The additional borrowings had been mainly to fund MAS's restructuring programme (around RM3 billion) and various investments. With the remaining RM3 billion conditional funding commitment for MAS and Khazanah's aim of expanding and diversifying its portfolio, the Company may incur more debt. Moreover, Khazanah is expected to be the key contributor of the GOM's call for a special dividend of up to RM400 million, on top of its normal dividend payout, to supplement the latter's significantly lower oil receipts. While the Company enjoys easy access to the debt capital market, the jittery global financial landscape may introduce additional uncertainty to Khazanah's funding options and influence the valuation and timing of its divestments.
Media contact
Tan Han Nee
(603) 7628 1023
hannee@ram.com.my
© Press Release 2015
