KUALA LUMPUR: RAM Ratings Services Bhd has reaffirmed the AA3/Stable rating of IJM Corp Bhd
’s RM3bil sukuk programme.
The rating agency said the reaffirmation reflected 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,” RAM said.
As at end-March 2017, the group’s construction contracts stood at a record RM8.6bil 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 five years.
RAM said IJM’s industry segment was anticipated to capitalise on in-house mega projects and would continue to replenish its order book with external projects within the region.
The rating agency said IJM’s 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 remained 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,” RAM said.
As at end-March 2017, IJM’s debt load stood at about RM6bil, 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,” it said.
“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,” RAM said.
Limited time offer:
Just RM5 per month.
