MARC AFFIRMS ITS RATING ON IJN CAPITAL SDN BHD'S RM209 MILLION SUKUK MUSYARAKAH PROGRAMME

Nov 30, 2011 -
MARC has affirmed its AAAIS rating on the outstanding RM55 million of the Series 1 RM100 million sukuk issued under IJN Capital Sdn Bhd’s (IJN Capital) RM209 million Sukuk Musyarakah Programme. The AA+ rating on the unissued Series 2 RM109 million sukuk has been withdrawn following the expiry of the facility’s drawdown period. The outlook is stable. IJN Capital is a wholly-owned special-purpose company of IJN Holdings Sdn Bhd (IJN Holdings).

The AAAIS initial issue rating on the RM100 million Series 1 sukuk was based in part on the structural protection afforded by the requirement for the main operating entity of the group, Institut Jantung Negara Sdn Bhd (IJN), to deposit 20% of payments received from the government into a trustee-controlled revenue reserve account. MARC notes that sukukholders’ approval was obtained during the current year to waive the aforementioned requirement on the basis that the reserve account had sufficient funds to cover sukuk principal repayments and profit payments until the redemption of the issued sukuk in March 2013. MARC sees no rating impact arising from the aforementioned waiver given the fully funded status of the reserve account. The stable outlook on the rating is underscored by the fully funded reserve account which effectively insulates sukukholders from changes in the credit profile of IJN.

Since MARC’s last rating action in November 2010, IJN has continued to maintain its favourable competitive position as a leading cardiovascular and thoracic centre in the country. The increased capacity from the hospital’s new wing has resulted in inpatients and outpatients increasing by 15.7% (FY2009: 0.1%) and 11.7% (FY2009: 6.9%) to 14,708 and 194,721 patients respectively. Additional operating theatres have also significantly reduced the waiting period for surgery. The construction of the new wing, which comprises 24 outpatient clinics, additional wards with a total of 134 beds and two operating theatres, had been funded by sukuk proceeds. MARC also takes note of IJN’s earnings stability and low receivables collection risk arising from its highly concentrated patient base of government employees and their dependants and pensioners.

IJN Holdings’ financial performance has improved with the increase in the number of patients. Its revenue and operating profit rose significantly by 21.5% and more than 100% to record RM370.7 million (FY2009: RM305.1 million) and RM8.3 million (FY2009: -RM31.2 million) respectively. The group posted a pre-tax profit of RM35.7 million for FY2010 compared to a pre-tax loss of RM18.7 million in FY2009 due in part to one-off gains of RM18.1 million in relation to compensation for delays in the construction of the new wing by the contractor. IJN Holdings’ cash and cash equivalents of RM168.2 million provide ample liquidity to cover its short-term obligations of RM96.6 million as at June 30, 2011. It also has a conservative financial profile with limited debt leverage, which affords the group considerable financial flexibility. The group’s overall financial flexibility is further enhanced by its 99.9% ownership by the Ministry of Finance.

Contacts:
Nisha Fernandez, +603-2082 2269/ nisha@marc.com.my;
Rajan Paramesran, +603-2082 2233/ rajan@marc.com.my.