FW: RAM Ratings: Mumtalakat's rating downgraded concurrently with Bahrain's

Published on 05 Sep 2017.

RAM Ratings has downgraded the rating of Bahrain Mumtalakat Holding Company BSC’s (Mumtalakat or the Company) RM3 billion Sukuk Murabahah Programme (2012/2032) to A3/Stable from A1/Negative subsequent to the downgrade of Bahrain’s sovereign rating to A3(pi)/Stable from A1(pi)/Negative. Mumtalakat’s issue rating is equated with Bahrain’s rating as the Company is viewed by RAM as an extension of the government, based on its critical linkage to the latter, its strategic economic role and the government’s solid support for the Company. The downgrade of Bahrain’s rating is mainly premised on the country’s persistently weak fiscal position coupled with heightened external vulnerabilities, given limited oil price recovery and government expenditure that will remain elevated for the foreseeable future.

Mumtalakat’s group-level pre-tax profit had more than doubled to BHD68.91 million in FY Dec 2016 (FY Dec 2015: BHD28.71 million), assisted by government financial assistance which had trended lower in the past few years, gains on investments, and significantly lower impairment losses recorded in FY Dec 2016, after a large one-off impairment charge related to Aluminium Bahrain (Alba) in the previous fiscal year. Group profitability had advanced despite a 12.4% y-o-y decline in revenue, attributable to a reduced contribution from Alba in view of weaker aluminium prices and premiums, as well as Gulf Air’s weaker operational performance.

As a holding company, Mumtalakat’s company-level income primarily comprises dividends from key portfolio companies across various industries, largely concentrated in Bahrain. The Company expects dividend income to increase in FY Dec 2017, considering Alba’s improved business environment and stronger financial performance observed to date, while contributions from other portfolio companies are likely to be maintained. Projected dividend income for the current fiscal year is more than sufficient to meet its forecasted operating and interest expenses.

Mumtalakat’s balance sheet remains conservative, given that its company and group-level average gearing ratios have been kept below 0.3 times over the last 5 years. Moreover, the Company derives adequate liquidity and financial flexibility from its cash balances, liquid treasury portfolio, and good access to various financing means domestically and abroad.

For further information, please refer to our media release and credit rating rationale on Bahrain (published on 5 September 2017). 

 

Analytical contact
Cheong Kah Weng 
(603) 7628 1113 
kahweng@ram.com.my

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