Genting Plantations carries corporate credit ratings of AA2/Stable/P1.
KUALA LUMPUR: RAM Rating Services does not expect Genting Plantations Bhd
’s proposed purchase of 21,995 hectares of plantation land in Indonesia to affect its ratings.
It said on Tuesday the purchase price of US$42.15mil (RM173mil) was relatively small to Genting Plantation’s balance sheet and it would be funded by internal funds and external financing.
As at end-March 2016, Genting Plantations had RM1.51bil cash reserves with another RM500mil in liquid investments.
“With this acquisition, the group’s net gearing ratio would increase slightly to 0.20 times from 0.16 times as at end-March 2016 (net gearing factoring in liquid instruments: 0.09 times),” it said.
Genting Plantations’ annualised funds from operations net debt cover, after considering cash balances and liquid investments, will narrow to about 0.50 times (1Q FY Dec 2016: annualised ratio of 0.86 times). These metrics remain supportive of its ratings.
“Operationally, the proposed acquisition would increase the group’s total land bank by about 9% to 260,371 ha.
“Contributions from the acquired estates would be immaterial in the near term, given that they had incurred mild losses in FY Dec 2015 with only 3,877 ha having been planted, of which just 1,601 ha had matured,” it said.
RAM Ratings said nevertheless, the land to be acquired is near the group’s existing estates in West Kalimantan, presenting opportunities for economies of scale and growth potential over the longer term.
On June 27, 2016, Palmindo Holdings Pte Ltd, a 73.69% susidiary of Genting Plantations, had proposed buy the 100% equity interests in Cahaya Agro Abadi Pte Ltd and Palm Capital Investment Pte Ltd, which in turn holds 95% of PT Agro Abadi Cemerlang and PT Palma Agro Lestari Jaya respectively.
The two Indonesian firms have the rights to develop approximately 21,995 ha of land in West Kalimantan. The proposed acquisition is expected to be completed in 3Q 2016.
Genting Plantations carries corporate credit ratings of AA2/Stable/P1, while the RM1.5bil Sukuk Murabahah programme (2015/2030) issued via its funding vehicle, Benih Restu Bhd, is rated AA2(s)/Stable.
As the sukuk programme is backed by an irrevocable and unconditional corporate guarantee from Genting Plantations, the enhanced issue rating reflects the credit profile of the group.
