RAM Ratings Reaffirms AA3/Stable Rating of IJM Corporation Berhad's RM3 Billion Sukuk Programme

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1. IB Press Release Service Published on :​ ​IslamicBanker.com Publications: ​https://www.islamicmarkets.com/publications RAM Ratings Reaffirms AA3/Stable Rating of IJM Corporation Berhad's RM3 Billion Sukuk Programme 20 June 2017 RAM Ratings has reaffirmed the AA3/Stable rating of IJM Corporation Berhad's (the Group) RM3 billion Sukuk Programme. The reaffirmation reflects the prospects of a stabilising performance, underpinned by the Group's diversified business segments. Notwithstanding the lower contribution from the infrastructure segment and expanding debt load to fund ongoing projects of its property development segment in FY Mar 2017, IJM's credit metrics held up within our expectations. From a credit perspective, RAM excludes debts which are concession-related and non-recourse to the holding company as these are ring-fenced at the respective operating entities. IJM benefits from a diversified business profile, with core construction, property, industry, plantation and infrastructure segments. As at end-March 2017, the Group's construction contracts stood at a record RM8.6 billion in outstanding value, primarily attributable to major infrastructure projects such as the West Coast Expressway, the New Deep Water Terminal at Kuantan Port and Mass Rapid Transit Line 2, which will provide the Group with good earnings visibility over the next 5 years. IJM's industry segment is anticipated to capitalise on in-house mega projects and will continue to replenish its order book with external projects within the region. While the infrastructure segment's earnings were affected in FY Mar 2017 by the moratorium on bauxite-related activities that has been in place since January 2016, the segment's prospects remain positive in view of recurring revenue streams from domestic toll roads with strategic alignments. The earnings of the Group's property segment will remain soft as the sector's recovery is anticipated to be slow in the near term while contributions from the plantation segment will remain stable as more planted areas attain maturity. As at end-March 2017, IJM's debt load stood at about RM6 billion, approximately 21% of which is concession-related and non-recourse to the holding company. While we expect the Group's debts to increase for the expansion of Kuantan Port in 2018, we have excluded the additional debt as it is non-recourse to the holding company. Stripping off non-recourse debts raised under the infrastructure division and corresponding earnings, the Group is expected to register a funds from operations debt cover of 0.14 times in end-March 2018. While its debt-servicing ability is adequate, IJM is expected to be slightly more leveraged than some AA3-rated peers. Any acquisitions or projects that necessitate corporate guarantees from the Group, or borrowings beyond our expectation, may strain its financial position.
2. IB Press Release Service Published on :​ ​IslamicBanker.com Publications: ​https://www.islamicmarkets.com/publications Organisation Name: News Type: RAM Rating Services Berhad RATING ANNOUNCEMENT Source: BNM Announcements Media Contact Padthma Subbiah (603) 7628 1162 padthma@ram.com.my Disclaimer: RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings' credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications. Similarly, the disclaimers above also apply to RAM Ratings' credit-related analyses and commentaries, where relevant.