Monday, December 3, 2018

FW: RAM Ratings reaffirms Sarawak Hidro’s AAA/Stable rating

 

Published on 30 Nov 2018.

RAM Ratings has reaffirmed the AAA/Stable rating of Sarawak Hidro Sdn Bhd's (Sarawak Hidro or the Company) RM5.54 billion Sukuk Murabahah (2016/2031). The rating reflects the Company's superior finance service coverage ratio (FSCR, with cash balances, post-distribution, calculated on payment dates) of 2 times throughout the Sukuk's tenure – a level commensurate with an AAA rating under RAM's project-finance rating framework. This is supported by the Government of Malaysia's (GoM) continued commitment to top up any shortfall in cashflow in relation to the targeted FSCR of 2 times throughout the life of the Sukuk. 

The irrevocable and unconditional liquidity support from the GoM is articulated through a strongly worded letter of undertaking (LoU) from the Minister of Finance (Incorporated) (MoF). The LoU remains in force despite changes in the Company's shareholding; Sarawak Energy Berhad (SEB, rated AA1/Positive), via its 100%-owned subsidiary, SEB Power Sdn Bhd (SEB Power), fully acquired Sarawak Hidro from the MoF on 16 August 2017.

Following the acquisition of Sarawak Hidro by SEB, the Company's debt-servicing ability has improved substantially, thanks to stronger dispatch demand and full payments received in accordance with the take-or-pay arrangement under its power purchase agreement with Syarikat SESCO Berhad (SESCO) – a wholly owned subsidiary of SEB and the sole off-taker of the Company's electricity output. Sarawak Hidro's FSCR stood at a robust 5.28 times as at the last repayment date in August 2018 – higher than our projected 3.95 times. Additionally, the Company is anticipated to enjoy substantial long-term operational cost savings through synergies with SEB's other hydro power plants. Sarawak Hidro is also bound by other strict covenants, which tighten the transaction structure and provide further certainty throughout the tenure of the Sukuk. 

Sarawak Hidro is an independent power producer that owns and operates the 2,400MW Bakun hydroelectric plant, under the PPA that runs up to 31 March 2043. The first unit of the Plant was commissioned in August 2011, with full commercial operation achieved in July 2014. The Bakun dam, which the Company owns, is Malaysia's largest hydro-powered electricity producer and key to the development of the Sarawak Corridor of Renewable Energy. As with other IPPs, Sarawak Hidro is exposed to regulatory and single-project risks.

Analytical contact
Ong Ju Laine
(603) 7628 1183
julaine@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

 

FW: RAM Ratings reaffirms AA2/Stable rating of Kesas’ sukuk

Published on 30 Nov 2018.

RAM Ratings has reaffirmed the AA2/Stable ratings of Kesas Sdn Bhd's (the Company) RM735 million Sukuk Musharakah IMTN (2014/2023). The reaffirmation of the rating is based on our expectation that the Company will maintain its strong debt-servicing aptitude, underpinned by the mature traffic profile of the Shah Alam Expressway (the SAE or the Expressway). 

The Expressway's traffic volume has been declining, with its average daily traffic (ADT) contracting to 326,872 vehicles in FY Jul 2018 (FY Jul 2017: 341,148 vehicles), albeit within RAM's expectation. This is largely attributable to the reduction in traffic volume at the Awan Besar/Kecil toll plaza, following the commencement of operations for the Light Rail Transit (LRT) extension, the road enhancement at the Jalan Puchong-Sungai Besi interchange and the abolishment of toll collections along Federal Highway Route 2 (FHR2). On the other hand, the cancellation of the KL-Klang Bus Rapid Transit (BRT) busway and the delay in completion date of the LRT 3 project to 2024 will relieve the downward pressure on the SAE's future traffic performance. 

Taking into account the potential traffic diversion to competing infrastructure, we envisage a further decline in the Expressway's traffic volume if its toll rate increases over the next few years (+25% to RM2.50 due in 2016 is assumed to be delayed to 2020 and +20% to RM3.00 in 2021). Despite a lower projected ADT in our stressed sensitivity tests, however, the Company's debt-servicing capability remains intact. 

While the abolishment of toll collections remains uncertain in the medium term, we believe that the GoM will balance its expropriation plans against any potential implication on the debt capital market. On this note, Kesas has been promptly receiving compensation payments from the GoM for its inability to raise toll rates as per its CA. We believe the GoM will continue to honour the compensation arrangement in the event of non-revision. 

As with most concession-related projects, Kesas is inherently exposed to single-project risk, although the entire stretch of the SAE is unlikely to be disrupted at any particular time.

 

Analytical contact
Nurhayati Sulaiman
(603) 7628 1040
yati@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

Wednesday, November 28, 2018

FW: RAM Ratings reaffirms AAA(s) ratings of sukuk issues by Khazanah’s funding conduits

 

Published on 28 Nov 2018.

RAM Ratings has reaffirmed the AAA(s)/stable ratings of Rantau Abang Capital Berhad's RM7.0 billion Islamic MTN Programme, Danga Capital Berhad's RM20.0 billion Multi-Currency Islamic Securities Programme and Ihsan Sukuk Berhad's RM1.0 billion Sukuk Ihsan Programme. Rantau Abang Capital, Danga Capital and Ihsan Sukuk (collectively, the Issuers) are the funding conduits of Khazanah Nasional Berhad (the Company) and had been incorporated for the sole purpose of facilitating the issuance of the Islamic securities.

The suffix (s) reflects the enhancement of the respective Issuers' Islamic securities beyond their own credit strength, based on Khazanah's contractual obligations vis-à-vis its undertaking to top up any shortfall in meeting expected income distributions and capital returns under the Islamic securities, upon their maturity or the occurrence of a dissolution event. In the case of Ihsan Sukuk, Khazanah's purchase undertaking to meet either full or partial repayment (reduced by a pre-determined percentage) of the Sukuk Ihsan is subject to the performance of the underlying sustainable and responsible investment project against targeted indicators.

The enhanced ratings are ultimately indicative of Khazanah's creditworthiness, premised on its critical link with the Government of Malaysia (GoM) and its fairly diversified investment portfolio that comprises strong credit profile investee companies and provide sustainable dividend earnings. Subsequent to a change in government in May 2018 and an overhaul of the Company's board in July 2018, Khazanah had announced an intention to review and restructure its portfolio in line with its key mandate – to distinguish between what are deemed strategic domestic investments and investment decisions based on commercial objectives. Nevertheless, the Company is expected to continue to hold meaningful stakes in investee companies or undertake investments in sectors viewed as strategically important to the country. The GoM's influence over Khazanah's overall direction and management also remains clear, with the Prime Minister designated as chairman of the Board. The GoM's full ownership of Khazanah (save for one share held by the Federal Land Commissioner) further underscores the direct linkage between the two parties. 

After a lacklustre performance for two consecutive years, Khazanah's portfolio realisable asset value (RAV) climbed 8.2% (2016: -3.2% y-o-y) to RM157.2 billion in fiscal 2017, while its net worth adjusted rebounded by 13.2% (2016: -6.2%) to RM115.6 billion. The improvements mainly stemmed from Khazanah's key listed companies and investments in Chinese equities including Alibaba. A recovery in Khazanah's profit before tax to RM2.8 billion in fiscal 2017 (2016: RM4.2 million) reflected these improvements, as well as larger divestment gains, stable dividend earnings, a lower impairment loss on MAB, and some upside in forex gains. 

In the near term, Khazanah's K-7 portfolio RAV and earnings could be affected by current headwinds on the global and domestic front as well as changes in the new government's policies and measures. In 1H 2018, the KLCI was down 5.7%. Over the same period, Khazanah's dividend earnings fell 13.6% y-o-y (unaudited) on an annualised basis. In line with the GoM's objective to reduce its participation in the private sector, the Company may divest some of its stakes in its key listed entities (known as the K-7), particularly those deemed non-strategic. While this could result in reduced earnings visibility and stability, we expect the process to be gradual, and measured against Khazanah's commercial investments in minimising any earnings gap. The Company's continuous emphasis on diversifying its portfolio (44.5% of RAV was derived from abroad as at end-2017), with plans to increase foreign investments and those in 'new economy' sectors that provide a more sustainable stream of revenue and mitigate disruptions, could help strengthen portfolio resilience over the longer term.  

Largely owing to financial support extended to weaker subsidiaries and for the purpose of funding its investment activities, Khazanah's debt level (including wholly owned SPVs and subsidiaries of the Company) remained high. Notwithstanding Khazanah's intention to exit loss-making non-strategic investee companies over the longer term, financial assistance may still be required as long as they remain in its stable. In addition, we do not discount the likelihood of further financial assistance to the government through higher dividend payouts. In fiscal 2017, Khazanah paid RM1 billion of dividends to the government and redeemed RM1.20 billion in redeemable cumulative convertible preference shares issued to the latter. That said, we expect the Company to continue to enjoy easy access to debt capital markets in raising funds. Viewed as a government-related issuer, Khazanah is able to leverage or pledge its assets, consistently keeping the ratio of its portfolio RAV to liabilities at around 3 times (fiscal 2017: 3.1 times). 

 

Analytical contact
Tan Han Nee
(603) 7628 1023
hannee@ram.com.my

Media contact
Pathma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

 

 

FW: AAM News: AXA to buy out China joint venture partners for 4.6 billion RMB

 

 

 

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FW: MARC AFFIRMS FI RATING OF AAA ON BANK PEMBANGUNAN

 

 

 

P R E S S   A N N O U N C E M E N T

                       

FOR IMMEDIATE RELEASE

 

MARC AFFIRMS FI RATING OF AAA ON BANK PEMBANGUNAN

 

MARC has affirmed its AAA financial institution (FI) rating on Bank Pembangunan Malaysia Berhad (Bank Pembangunan). The rating carries a stable outlook.

 

The FI rating is solely premised on Bank Pembangunan’s status as a wholly government-owned development financial institution (DFI) which was incorporated to extend loans and financial support to specific industries promoted by the government. Government support to the DFI has been evident through government guarantees extended on borrowings as well as compensation provided for loss of interest income and credit loss.

 

Gross impaired loans (GIL) ratio stood at 12.1% as at end-2017 (2016: 15.0%). The lower GIL ratio was attributable to higher write-offs which lowered gross impairments in the technology, oil and gas, and maritime sectors. These three sectors had faced the brunt of the bank’s problematic loans, with about 64% or RM1.6 billion of their total exposure of RM2.6 billion having been classified as impaired in 2017. The bank recorded slightly higher impairments in the infrastructure loan portfolio, which had a GIL ratio of 5.2% as at end-2017 (2016: 4.8%).

 

Infrastructure loans have remained key to Bank Pembangunan’s growth, accounting for 74% of total loans approved of RM3.3 billion during 2017. Concentration risk is mitigated as the majority of existing infrastructure loans are related to government-initiated projects which benefit from direct or indirect government support. MARC notes that the group’s gross loans have continued contracting in recent years as loan growth has been offset by large repayments. Given the challenging economic conditions, MARC expects loan growth over the near term to remain muted.

 

Bank Pembangunan’s capital position as reflected by its Basel I core and risk-weighted capital ratios of 29.1% and 33.4% remained strong. The strong capital position offers a buffer against asset quality weakness. In 2017, the DFI’s profit before tax rose 56.7% y-o-y to RM325.3 million, mainly attributable to lower impairments in the year.

 

Bank Pembangunan’s funding profile remained largely supported by the government as reflected by government-guaranteed borrowings and deposits from the government and its related entities accounting for 34.4% and 39.9% of total funding.

 

Contacts: Douglas De Alwis, +603-2717 2965/ douglas@marc.com.my; Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my

 

November 28, 2018

 

 

[This announcement is available in MARC’s corporate website at http://www.marc.com.my]

----   DISCLAIMER    ----

This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.

 

© 2018 Malaysian Rating Corporation Berhad

 

IMPORTANT NOTICE:
The information contained in this email and/or any attachment hereto is strictly confidential and privileged. If you are not the intended recipient, and/or have received this email in error, you must not copy, disseminate or disclose the contents of this message and/or any attachment to any other person. Please notify the sender and delete this message and any attachment from your system. Malaysian Rating Corporation Berhad (“MARC”) accepts no liability in respect of prohibited and unauthorised use by an unintended addressee or recipient. Any opinion, view or other information in this message and/or any attachment hereto which does not relate to the official business of MARC is that of the individual sender. Although this email and/or any attachment is believed to be free of any virus or other defect which may affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus-free and MARC accepts no responsibility for any loss or damage arising in any way from the use thereof.

 

Tuesday, November 27, 2018

FW: MARC AFFIRMS SINAR KAMIRI’S RATING AT AA-IS WITH A STABLE OUTLOOK

 

 

P R E S S  A N N O U N C E M E N T

 

FOR IMMEDIATE RELEASE

 

MARC AFFIRMS SINAR KAMIRI'S RATING AT AA-IS WITH A STABLE OUTLOOK

 

MARC has affirmed its AA-IS rating on Sinar Kamiri Sdn Bhd's Green SRI Sukuk Wakalah of up to RM245.0 million. The outlook on the rating is stable.

 

Sinar Kamiri is undertaking the development of a greenfield solar power generation facility with a capacity of 49.0MWac in Sungai Siput, Perak. The rating primarily reflects Sinar Kamiri's healthy project fundamentals that are underpinned by a 21-year solar power purchase agreement with Tenaga Nasional Berhad (TNB) under which energy generated by Sinar Kamiri's solar power plant up to a certain quantity will be purchased by TNB at a fixed tariff.

 

The project is expected to achieve commercial operations date (COD) by November 30, 2018, a three-month delay from the initial scheduled COD (SCOD) on August 31, 2018. The delay has been partly attributed to issues relating to plant construction and end-testing of TNB interconnection facilities. As at end-October 2018, the plant's overall construction progress stood at 96.2% with the outstanding works mainly related to testing and commissioning before achieving COD. MARC notes that the plant has already achieved initial operation on November 2, 2018, and therefore any further delay to TNB's walkaway event date of February 27, 2019 is highly unlikely.

 

Capex during construction has remained within budget with a slight increase in development expenses at the plant. Additional expenses incurred were met by funds from the contingency buffer, higher interest income as well as savings from the zerorisation of GST effective June 1, 2018. While Sinar Kamiri is liable to pay liquidated damages (LD) to TNB given the failure to achieve SCOD, the payments of RM49,000 for each day of delay from the SCOD are expected to be recovered from engineering, procurement and construction contractor Entrutech Sdn Bhd. MARC understands that TNB has not given any indication on the LDs payable although the company is contractually bound to pay.

 

The rating is moderated by the variability of solar resource which determines the amount of electricity generated. Sinar Kamiri has utilised internationally used data for its cash flow forecast. The data is consistent with solar farms in an equatorial environment. The operations and maintenance (O&M) works will be undertaken by Mudajaya Facilities Management Sdn Bhd, which is expected to draw expertise from Mudajaya group's experience in managing a 10MW solar power plant in Gebeng, Pahang. The O&M job scope of a solar power plant is relatively less complicated compared to a conventional power plant, which mitigates operational risks.

 

Sinar Kamiri is also covered by equipment warranties that are in line with acceptable industry standards. A maintenance reserve amounting to RM10.0 million will be built up over 10 years starting from a year after the COD is achieved to cover contingencies for major maintenance works including the replacement of solar panels and inverters. Any withdrawals from the reserves will be replenished over a period of three years from the date of withdrawals.

 

Under MARC's sensitised cases, the company would be able to comply with the minimum financial service cover ratio with cash of 1.25x throughout the sukuk tenure. The sensitivity includes non-receipt of GST input tax refunds of RM10.6 million, plant unavailability of 2.4%, and LDs payable to TNB (without LD receivables from EPC). Notably, Sinar Kamiri would need to rely on brought-forward cash given that the FSCR (without cash balances) falls below 1.00x in some years.

 

The stable outlook incorporates the expectation that the project will achieve COD before the walkaway event date and generate stable income streams that are supportive of project economics.

 

Contacts: Wan Abdul Muiz Wan Abdul Ghafar, +603-2717 2939/ muiz@marc.com.my; Hari Vijay, +603-2717 2937/ harivijay@marc.com.my.

 

November 27, 2018

 

 

[This announcement is available in MARC's corporate website at http://www.marc.com.my]

--- DISCLAIMER ---

This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.

 

© 2018 Malaysian Rating Corporation Berhad

 

 

IMPORTANT NOTICE:
The information contained in this email and/or any attachment hereto is strictly confidential and privileged. If you are not the intended recipient, and/or have received this email in error, you must not copy, disseminate or disclose the contents of this message and/or any attachment to any other person. Please notify the sender and delete this message and any attachment from your system. Malaysian Rating Corporation Berhad ("MARC") accepts no liability in respect of prohibited and unauthorised use by an unintended addressee or recipient. Any opinion, view or other information in this message and/or any attachment hereto which does not relate to the official business of MARC is that of the individual sender. Although this email and/or any attachment is believed to be free of any virus or other defect which may affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus-free and MARC accepts no responsibility for any loss or damage arising in any way from the use thereof.

 

Monday, November 26, 2018

FW: AAM News: Allianz Real Estate invests in logistics sector in China and India

 

 

 

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As per the Guidance on Direct Marketing issued by the Office of the Privacy Commissioner for Personal Data in Hong Kong which took effect on April 1, 2013, we would like to inform you that we intend to continue sending you promotional emails such as newsletters, new promotions and product updates. If you do not wish to receive such emails, please contact us at news@asiaasset.com. For enquiries please contact us at (852) 2547-7331.

 

 

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