RAM Ratings has reaffirmed the AA3 rating of Jati Cakerawala Sdn Bhd’s (Jati or the Company) RM540 million Sukuk Murabahah (2013/2023) while revising the outlook on the rating to negative from stable.

Published on 08 December 2016

RAM Ratings has reaffirmed the AA3 rating of Jati Cakerawala Sdn Bhd’s (Jati or the Company) RM540 million Sukuk Murabahah (2013/2023) while revising the outlook on the rating to negative from stable.

The negative outlook reflects our concerns over Jati’s intention to maintain hefty dividend payments of up to RM26 million per annum, subject to meeting its distribution covenants, subsequent to an unexpected and substantial dividend payment of RM26 million in FY Sep 2016 (previously projected: RM6.58 million). Should these payments materialise without cashflow outperformance, the Company’s subordinated finance service coverage ratio (Sub-FSCR) (with cash balances, post distribution) could deteriorate to a minimum of 1.40 times over the remaining tenure of the Sukuk under our sensitivity analysis. While Jati’s Sub-FSCR (with cash balances, post distribution) is projected to breach the 1.50-time threshold for AA3-rated transactions upon repayment of the Sukuk’s principal in July 2017, its overall debt-repayment capability remains unimpaired.

Meanwhile, the rating reaffirmation is premised on Jati’s still strong cashflow coverage – the Company posted a healthy Sub-FSCR (with cash balances, post distribution) of 1.63 times on the recent sukuk payment date of 29 July 2016. Purely an investment-holding company, Jati’s source of cashflow – dividend income from Tenaga Perlis Consortium Sdn Bhd, an independent power producer that owns and operates a 650-MW combined-cycle, gas-turbine power plant in Perlis – remained sturdy in view of the latter’s robust operational metrics and cash-generating aptitude, as reflected in its AA1/Stable issue rating.

Analytical contact                                            Media contact
Wang Wai Wah                                                  Padthma Subbiah
(603) 7628 1110                                                (603) 7628 1162
waiwah@ram.com.my                                       padthma@ram.com.my