KUALA LUMPUR: RAM Rating has reaffirmed the enhanced AA 1 (s)/Stable rating of Pendidikan Industri YS Sdn Bhd’s (PIYSB) RM150mil Bai’ Bithaman Ajil Islamic Debt Securities (2008/2022) (BaIDS).
According to the agency, PIYSB's debt-servicing ability with respect to the BaIDS remains substantially enhanced by the support of the Selangor state government (SSG), as detailed in a letter of support.
"In February 2011, the Selangor State Executive Council approved a RM205.5mil 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)," RAM said.
PIYSB provides educational services via University Selangor and is owned by the state government via Menteri Besar Selangor (Perbadanan) (MBI).
RAM added that the investigations by the Malaysian Anti-Corruption Commission on the alleged misappropriation of payments by MBI to Jana Niaga Sdn Bhd concerning Unisel is unlikely to affect the rating of the BaIDS.
However, it noted PIYSB's stand-alone credit profile is very weak. Unisel has not been able to generate sufficient cashflow given its low student population of 9,889 and 8,885 in 2016 and H1 2017, which is below the break-even level of 12,700.
"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," it said.
According to RAM, PIYSB is no longer technically solvent following an increase in its paid-up capital from RM640,000 to RM60.64mil as well as the recognistion of a RM127.65mil revaluation gain in FY Dec 2015.
The company is highly leveraged with a gearing ratio of 1.15 times as at end-December 2016. It held RM20.94mil in cash and bank balances against RM15mil of short-term debts as at end-June 2017.
Despite PYISB's vulnerable liquidity position, it supports the state's private higher-education objectives and is likely to continue receiving financial assistance, said RAM
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