RAM Ratings reaffirms Gulf Investment Corporation's AAA/P1 ratings

Published on 18 November 2011
RAM Ratings has reaffirmed Gulf Investment Corporation GSC’s (“GIC” or “the Corporation”) respective long- and short-term financial institution ratings at AAA and P1. At the same time, the AAA ratings of the Corporation’s RM3.5 billion Sukuk Wakalah bi Istithmar Programme (2011/2031), RM600 million Senior Unsecured Bonds (2008/2013) and RM400 million Senior Unsecured Bonds (2008/2023) have also been reaffirmed. All the long-term ratings have a stable outlook.

GIC’s ratings remain supported by its privileged position within the Gulf Corporation Council (“GCC”) and the strong support from its shareholders. The latter is underlined by a USD1.1 billion capital injection, along with steady placement of deposits by the GCC central banks and government entities, amid the global financial crisis in 2008/09. With its shareholders comprising the governments of Kuwait, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Oman, GIC’s mandate is to support the development of private enterprises and economic growth within the GCC. Given its strategic role, the Corporation enjoys immunity and exceptions in terms of regional regulatory norms, including exemptions from asset nationalisation, currency controls and taxes.

Boosted by the robust performance of its key principal investments, GIC’s pre-tax profit strengthened to a respective USD151 million and USD95 million in FYE 31 December 2010 (“FY Dec 2010”) and 1H FY Dec 2011 (FY Dec 2009: USD91 million). With several more of its investments becoming operational soon, we expect contributions from its principal investment portfolio to increase further in the near future.

Nevertheless, we remain mindful that these assets are usually green-field projects that entail lengthy gestation periods before they can generate returns. Notably, the Corporation still maintains a sizeable portfolio of investment securities for income and risk-diversification purposes, following its deleveraging exercise during the global financial crisis. This portfolio mainly comprises high-quality investment securities from Europe and the United States. Based on its business model, GIC’s profit performance is susceptible to the inherent volatility of the financial markets and the performances of its key principal investments.

Meanwhile, GIC’s liquidity position is deemed healthy; financial support from its shareholders is expected to be readily extended, if required. We note that the Corporation has no scheduled debt redemption in FY Dec 2012. Backed by the accretion of profits and revaluation gains on its available-for-sale investments, GIC’s tier-1 and overall risk-weighted capital-adequacy ratios (“RWCARs”) had been lifted to 31.3% as at end-June 2011 (end-December 2009: 27.7%). The deleveraging of its balance sheet had eased its leverage ratio to 2.5 times as at the same date (end-December 2009: 3.5 times). In the near term, the Corporation will be taking a cautious stance on its investment strategy in view of the current uncertainties on the global economic front; the management intends to maintain its RWCAR at a minimum of 16% while capping its leverage ratio at 4 times.

Media contact
Sophia Lee
(603) 7628 1189
sophia@ram.com.my