RAM Ratings reaffirms AA2 rating of Mumtalakat’s RM3 billion Sukuk Murabahah Programme

Published on 02 August 2013

RAM Ratings has reaffirmed the AA2 long-term rating of Bahrain Mumtalakat Holding Company BSC’s (“Mumtalakat” or “the Company”) RM3 billion Sukuk Murabahah Programme (2012/2032), with a stable outlook. Mumtalakat is Bahrain’s wholly owned investment arm, with the strategic role of spearheading structural changes in the kingdom’s economy.

RAM considers Mumtalakat as an extension of the government of Bahrain (“the Government”), based on the critical links and strong relationship between them; the likelihood of extraordinary government support for the Company is deemed indisputable. As such, Mumtalakat’s rating is linked to Bahrain’s sovereign creditworthiness. RAM’s view on Bahrain’s credit standing will also have a bearing on the Company’s long-term rating and outlook.

Mumtalakat’s investment portfolio spans a wide range of industries, with key assets in manufacturing, aviation, telecommunication and financial services. The Company’s dividend income is almost entirely derived from its direct investments in these sectors, except aviation. While Mumtalakat’s key investee company, Aluminium Bahrain BSC (“Alba”), is most susceptible to commodity price volatility and cyclicality, these risks are moderated by Alba’s significant cost advantage and healthy operational performance. We note that the geographic risk exposure of most of Mumtalakat’s investee companies is still concentrated in Bahrain.

Mumtalakat’s overall profit performance is deemed weak due to its full ownership of loss-making national carrier Gulf Air Company BSC (“Gulf Air”). That said, the Government has been providing substantial financial support to Gulf Air via the Company. Mumtalakat’s balance sheet is considered conservative given its company- and group-level average gearing ratios that have been kept below 0.5 times for the last 5 years. Mumtalakat also derives ample liquidity and substantial financial flexibility from its company-level cash balances, unused credit lines, ready access to bank and debt financing, and highly-liquid treasury portfolio.

Media contact

Cheong Kah Weng

(603) 7628 1113

kahweng@ram.com.my