FW: RAM Ratings reaffirms Besraya’ sukuk rating, maintains negative outlook

Published on 18 Jan 2019.

RAM Ratings has reaffirmed the AA3/Negative rating of Besraya (M) Sdn Bhd's (Besraya or the Company) RM700 million Sukuk Mudharabah Issuance Facility (2011/2028). The negative outlook reflects our ongoing concerns about the Company's higher than expected dividend distributions, which may deteriorate its debt-servicing indicators. Following Besraya's hefty RM70 million dividend payout in FY Mar 2018, its resultant projected finance service coverage ratio (FSCR, with cash balances, post-distribution) under RAM's sensitised case suggests no headroom for further distributions and/or underperformance in its cash-generating ability, in order to maintain the FSCR threshold of 2 times for AA3-rated transactions. The negative outlook will be maintained until the Company is able to display a consistent track record of financial discipline. Meanwhile, on the Sukuk's latest principal repayment date of 28 July 2018, the Company's FSCR (with cash balances, post-distribution) of 2.43 times was slightly higher than our expectation, largely due to traffic outperformance at the Loke Yew plaza. Given that the Company is currently constructing Kuchai Link 2, which will necessitate sizeable capex over the next two years, cash retention will have to be prioritised during this period.

The reaffirmation of the rating is based on Besraya's stable earnings and cashflow-generating ability, underpinned by the established traffic profile of the Sungai Besi Highway and the Besraya Eastern Extension (collectively known as "the Highways"). The Highways registered an average daily traffic (ADT) of 156,100 vehicles and a 3.8% y-o-y ADT growth in FY Mar 2018, attributable to the steady increase in traffic volume by 11.8% y-o-y at the Loke Yew toll plaza. That said, the ADT for the Mines toll plaza contracted 1.0% y-o-y in the same period, due to the availability of alternative routes. As such, we have assumed that Besraya's last toll-rate hike will take place in 2020 (originally scheduled for 1 January 2018), with a 4.0% contraction in the Highway's traffic volume. Thereafter, traffic growth is anticipated to recover at an average of 1.3% per annum throughout the remaining tenure of the Sukuk.

Should the tariff hike be deferred, Besraya's debt-servicing capacity would be compromised if the Company were not fully compensated through cash payments. We note that the Government of Malaysia (GoM) has discharged its compensation obligations despite some delay. We believe the GoM will continue honouring the compensation arrangement in the event of non-revision of toll rates, as can be observed to date.  

Similar to other toll-road projects, Besraya is inherently 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 Maybank’s AAA ratings

Published on 21 Dec 2018.

RAM Ratings has reaffirmed Malayan Banking Berhad's (Maybank or the Group) respective ASEAN and Malaysian national-scale financial institution ratings at seaAAA/Stable/seaP1 and AAA/Stable/P1. Concurrently, the ratings of all the Group's debt issues have been reaffirmed. 

Maybank is the fourth-largest bank by assets in ASEAN. The reaffirmation of Maybank's ratings reflects the Group's strong ASEAN franchise, solid capitalisation, diversified earnings base and deposit funding strength in Malaysia. As the largest bank in Malaysia, Maybank is systemically important to the country. 

While pressure on the Group's asset quality lingers, the credit quality of its loan portfolio is expected to hold up. Its gross impaired loan (GIL) ratio had weakened to 2.7% as at end-September 2018, mainly due to a large collateralised loan in Singapore in 2Q FY Dec 2018. On a positive note, the inflow of impaired oil and gas (O&G) accounts, which had contributed to a rise in the Group's GIL ratio in 2016, has slowed. Maybank recorded a respective 31% and 15% y-o-y reduction in impairment losses in fiscal 2017 and 9M fiscal 2018, translating into an annualised credit cost ratio of 0.4%. This is a notable improvement from the 0.6% seen in fiscal 2016 when Maybank had actively managed the rescheduling and restructuring of borrowers in the O&G and related sectors, and borne the necessary provisions. That said, increasing interest rates and uncertainties arising from the upcoming presidential election in Indonesia, the challenging outlook for the power sector in Singapore and the ongoing trade war between the US and China could introduce some stress to asset quality.

Maybank recorded a pre-tax profit of RM10.0 billion in fiscal 2017 (9M fiscal 2018: RM7.8 billion). Its profit performance is improving on account of easing credit costs and should support internal capital generation. Taking into consideration RM2.8 billion of regulatory reserves as at end-September 2018, the Group's adjusted GIL coverage ratio stood healthy at 99%. Meanwhile, Maybank's common equity tier-1 capital ratio was a solid 13.6% as at the same date.

Table 1: Maybank's issue ratings

	Rating/Outlook
Maybank
RM3.0 billion Subordinated Note Programme (2011/2031)	AA1/Stable
RM20.0 billion Subordinated Note Programme (2012/2112)	AA1/Stable
RM10.0 billion Additional Tier-1 Capital Securities Programme     (2014/2114)	AA3/Stable
RM10.0 billion Senior and Subordinated Sukuk Murabahah   Programme (2015/2117)  - Senior  - Subordinated	AAA/Stable AA1/Stable
RM10.0 billion Commercial Paper/Medium Term Note   Programme (2016/2023)	AAA/Stable/P1

Note: Maybank has redeemed and subsequently terminated the RM4.0 billion Innovative Tier-1 Capital

Securities Programme (2008/2073) in September 2018

Analytical contact                
Chan Yin Huei                    
(603) 7628 1180                
yinhuei@ram.com.my            

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

 

 

FW: AAM News: Bond ETFs drawing more institutional investors, Van Eck says

 

 

If you cannot view this mail please click here.   Latest News  |  Magazine  |  Events  |  Best of the Best Awards  |  E-Magazine   Latest News 24 December 2018 Bond ETFs drawing more institutional investors, Van Eck says Market Access: Large investors increasingly using bond ETFs for asset allocation, according to a senior company executive   Singapore's Fullerton taps insiders to fill roles of duo who left for US rival Going Places: Karen Wu and Ken Goh take over responsibilities of Jason Zhu and Shih Yu-Jen, who joined Franklin Templeton Read More PE Panorama: A big X-mas gift may face bigger challenges Private Equity: Isssues affecting the asset class go beyond making money in a frothy Asian market Read More Malaysia EPF's third quarter income up 12.82% on local, regional stock gains Investments: But the pension fund has a cautious outlook due to a "challenging" domestic market and an uncertain external environment Read More Monthly Top Ten PE Panorama: Talent wars…and an image problem Malaysia may issue more equity crowdfunding, P2P lending licences in 2019 Cambridge Associates' head of Asia Alvin Tay resigns South Korea's NPS picks four managers for alternatives mandates, report says BNP Paribas names Caleb Wong as head of alternative investors in Asia Pacific AXA to buy out China joint venture partners for 4.6 billion RMB Allianz Real Estate invests in logistics sector in China and India Singapore's GLP and Canadian partners set up European logistics fund PE Panorama: Don't bet heavily on IPO exits for private equity-backed firms Korea's KIC hires manager for first ESG mandate, adopts responsible investing rules   Coming Up         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.     Unsubscribe to this mailing list COPYRIGHT © 2018 ASIA ASSET MANAGEMENT. ALL RIGHTS RESERVED. 1701 Singga Commercial Centre, 148 Connaught Road West, Hong Kong   Tel: (852) 2547-7331   E-mail: enquiries@asiaasset.com

 

 

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

 

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

 

 

 

If you cannot view this mail please click here.   Latest News  |  Magazine  |  Events  |  Best of the Best Awards  |  E-Magazine   Latest News 28 November 2018 AXA to buy out China joint venture partners for 4.6 billion RMB Insurance: AXA will become the first foreign insurer to fully own a major property and casualty insurer in China   Securitised debt Debt Markets: The US$13 trillion-plus securitisation market is one of the largest categories in the US fixed income space Read More Malaysia's Affin Hwang AM inks pact with Samsung AM to develop products for local market Market Access: Affin Hwang AM expects to launch its first leveraged and inverse ETF in the first half of 2019 Read More South Korea's NPS picks four managers for alternatives mandates, report says Pensions: IGIS and Samsung said to be selected for real estate mandate, Shinhan and Samchully for renewable energy mandate Read More Monthly Top Ten South Korea pension market a key driver of alternative investments Schroders appoints Amy Cho as Hong Kong CEO Maybank AM, Schroders unveil strategic partnership for Malaysia market Southeast Asia private equity, venture capital investments surge 83% in second quarter Rajeev Mittal joins Fidelity International as managing director for Asia Pacific ex-Japan Banker Azura Azman is top candidate to head Malaysia bourse, sources say Demographics, fundamentals buoy self-storage prospects in Asia Pacific Malaysia extends tax breaks for Islamic, retail bond issuance Malaysia to offer free health insurance for the poor, tax breaks for hiring older workers Malaysia's securities regulator to allow more diversified ETFs   Coming Up         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.     Unsubscribe to this mailing list COPYRIGHT © 2018 ASIA ASSET MANAGEMENT. ALL RIGHTS RESERVED. 1701 Singga Commercial Centre, 148 Connaught Road West, Hong Kong   Tel: (852) 2547-7331   E-mail: enquiries@asiaasset.com

 

 

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

 

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