RAM Ratings Reaffirms Pendidikan Industri YS's Sukuk Rating

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1. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications RAM​ ​Ratings​ ​Reaffirms​ ​Pendidikan​ ​Industri YS's​ ​Sukuk​ ​Rating 17​ ​October​ ​2017 RAM​ ​Ratings​ ​has​ ​reaffirmed​ ​the​ ​enhanced​ ​AA1(s)/Stable​ ​rating​ ​of​ ​Pendidikan​ ​Industri​ ​YS​ ​Sdn Bhd's​ ​(PIYSB​ ​or​ ​the​ ​Company)​ ​RM150​ ​million​ ​Bai'​ ​Bithaman​ ​Ajil​ ​Islamic​ ​Debt​ ​Securities (2008/2022)​ ​(BaIDS).​ ​The​ ​rating​ ​reflects​ ​our​ ​view​ ​that​ ​PIYSB's​ ​debt-servicing​ ​ability​ ​in​ ​respect of​ ​the​ ​BaIDS​ ​remains​ ​substantially​ ​enhanced​ ​by​ ​the​ ​demonstrated​ ​and​ ​expected​ ​support​ ​of​ ​the Selangor​ ​State​ ​Government​ ​(SSG​ ​or​ ​the​ ​State).​ ​In​ ​February​ ​2011,​ ​the​ ​Selangor​ ​State​ ​Executive Council​ ​approved​ ​a​ ​RM205.5​ ​million​ ​allocation​ ​for​ ​all​ ​repayments​ ​on​ ​the​ ​BaIDS​ ​between​ ​2012 and​ ​2022.​ ​Pursuant​ ​to​ ​that,​ ​the​ ​State​ ​has​ ​been​ ​paying​ ​all​ ​the​ ​principal​ ​and​ ​profit​ ​payments​ ​due on​ ​behalf​ ​of​ ​PIYSB​ ​since​ ​January​ ​2012,​ ​including​ ​those​ ​due​ ​in​ ​January​ ​2018,​ ​which​ ​has​ ​been credited​ ​into​ ​the​ ​finance​ ​service​ ​and​ ​redemption​ ​account​ ​(FSRA). The​ ​SSG's​ ​intention​ ​of​ ​supporting​ ​PIYSB​ ​is​ ​detailed​ ​in​ ​a​ ​strongly​ ​worded​ ​Letter​ ​of​ ​Support (LoS).​ ​Although​ ​not​ ​an​ ​outright​ ​guarantee,​ ​the​ ​document​ ​states​ ​that​ ​the​ ​SSG​ ​will​ ​ensure​ ​ ​either through​ ​equity,​ ​loans,​ ​grants​ ​and/or​ ​other​ ​means​ ​ ​that​ ​PIYSB​ ​fully​ ​and​ ​promptly​ ​meets​ ​its financial​ ​obligations​ ​under​ ​the​ ​BaIDS​ ​throughout​ ​the​ ​tenure​ ​of​ ​the​ ​facility.​ ​PIYSB​ ​provides educational​ ​services​ ​via​ ​Universiti​ ​Selangor​ ​(Unisel),​ ​and​ ​is​ ​wholly​ ​owned​ ​by​ ​the​ ​State Government​ ​via​ ​Menteri​ ​Besar​ ​Selangor​ ​(Pemerbadanan)​ ​(MBI). While​ ​the​ ​recent​ ​investigations​ ​by​ ​the​ ​Malaysian​ ​Anti-Corruption​ ​Commission​ ​on​ ​the​ ​alleged misappropriation​ ​of​ ​payments​ ​by​ ​MBI​ ​to​ ​Jana​ ​Niaga​ ​Sdn​ ​Bhd​ ​concerning​ ​Unisel​ ​led​ ​to​ ​negative publicity,​ ​it​ ​is​ ​unlikely​ ​to​ ​affect​ ​the​ ​rating​ ​of​ ​the​ ​BaIDS.​ ​That​ ​said,​ ​we​ ​will​ ​continue​ ​monitoring​ ​the relevant​ ​developments​ ​on​ ​this​ ​issue. Independent​ ​of​ ​the​ ​LoS,​ ​PIYSB's​ ​stand-alone​ ​credit​ ​profile​ ​is​ ​very​ ​weak.​ ​Plagued​ ​by​ ​a​ ​weak franchise​ ​and​ ​keen​ ​competition,​ ​Unisel's​ ​average​ ​student​ ​population​ ​remains​ ​below​ ​its break-even​ ​level​ ​of​ ​12,700​ ​students.​ ​The​ ​university's​ ​average​ ​student​ ​population​ ​stood​ ​at​ ​a respective​ ​9,889​ ​and​ ​8,885​ ​in​ ​2016​ ​and​ ​1H​ ​2017,​ ​despite​ ​efforts​ ​to​ ​increase​ ​the​ ​numbers.​ ​As such,​ ​PIYSB​ ​has​ ​not​ ​been​ ​able​ ​to​ ​generate​ ​sufficient​ ​cashflow​ ​to​ ​meet​ ​its​ ​current​ ​operational requirements​ ​and​ ​financial​ ​payments,​ ​given​ ​its​ ​low​ ​fees​ ​and​ ​hefty​ ​costs. While​ ​there​ ​could​ ​be​ ​an​ ​uptick​ ​in​ ​student​ ​numbers​ ​given​ ​Unisel's​ ​collaboration​ ​with​ ​the Association​ ​of​ ​International​ ​Accountants​ ​and​ ​an​ ​upcoming​ ​branch​ ​campus​ ​in​ ​Bangladesh,​ ​we do​ ​not​ ​expect​ ​the​ ​increase​ ​to​ ​be​ ​significant​ ​in​ ​the​ ​near​ ​to​ ​medium​ ​term.​ ​Without​ ​a​ ​substantial rise​ ​in​ ​revenue​ ​or​ ​cost​ ​reduction,​ ​PIYSB​ ​is​ ​envisaged​ ​to​ ​remain​ ​in​ ​the​ ​red​ ​and​ ​keep​ ​relying​ ​on financial​ ​assistance​ ​from​ ​the​ ​SSG.
2. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications PIYSB​ ​is​ ​no​ ​longer​ ​technically​ ​insolvent​ ​following​ ​the​ ​increase​ ​in​ ​its​ ​paid-up​ ​capital,​ ​from RM0.64​ ​million​ ​to​ ​RM60.64​ ​million,​ ​as​ ​well​ ​as​ ​the​ ​recognition​ ​of​ ​a​ ​RM127.65​ ​million​ ​revaluation gain​ ​in​ ​FY​ ​Dec​ ​2015.​ ​Nevertheless,​ ​the​ ​Company​ ​is​ ​highly​ ​leveraged.​ ​As​ ​at​ ​end-December 2016,​ ​its​ ​gearing​ ​ratio​ ​stood​ ​at​ ​1.15​ ​times,​ ​albeit​ ​an​ ​improvement​ ​over​ ​1.50​ ​times​ ​of​ ​a​ ​year earlier​ ​due​ ​to​ ​a​ ​lighter​ ​debt​ ​load.​ ​PIYSB​ ​held​ ​RM20.94​ ​million​ ​of​ ​cash​ ​and​ ​bank​ ​balances against​ ​RM15.00​ ​million​ ​of​ ​short-term​ ​debts​ ​as​ ​at​ ​end-June​ ​2017.​ ​However,​ ​the​ ​Company's liquidity​ ​position​ ​is​ ​expected​ ​to​ ​stay​ ​vulnerable​ ​as​ ​it​ ​relies​ ​on​ ​its​ ​timely​ ​requests​ ​for​ ​financial assistance​ ​and​ ​fund​ ​disbursements​ ​from​ ​the​ ​SSG. PIYSB​ ​derives​ ​financial​ ​flexibility​ ​from​ ​the​ ​SSG,​ ​given​ ​its​ ​role​ ​in​ ​supporting​ ​the​ ​State's​ ​private higher-education​ ​objectives.​ ​RAM's​ ​recent​ ​interaction​ ​with​ ​senior​ ​officials​ ​of​ ​the​ ​State Government​ ​lends​ ​further​ ​support​ ​to​ ​our​ ​view​ ​that​ ​the​ ​State​ ​will​ ​continue​ ​extending​ ​financial assistance​ ​to​ ​PIYSB​ ​if​ ​needed. 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: The​ ​credit​ ​rating​ ​is​ ​not​ ​a​ ​recommendation​ ​to​ ​purchase,​ ​sell​ ​or​ ​hold​ ​a security,​ ​inasmuch​ ​as​ ​it​ ​does​ ​not​ ​comment​ ​on​ ​the​ ​security's​ ​market price​ ​or​ ​its​ ​suitability​ ​for​ ​a​ ​particular​ ​investor,​ ​nor​ ​does​ ​it​ ​involve​ ​any audit​ ​by​ ​RAM​ ​Ratings.​ ​The​ ​credit​ ​rating​ ​also​ ​does​ ​not​ ​reflect​ ​the legality​ ​and​ ​enforceability​ ​of​ ​financial​ ​obligations. 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
3. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications 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​ ​analysis​ ​and​ ​commentaries,​ ​where​ ​relevant.