YTL units get upgrade on better earnings

The local credit rating agency has upgraded YTL Corp Bhd and YTL Power International Bhd’s outlook in the long term to “stable”, while Malayan Cement Bhd’s rating was reaffirmed as “stable”.

PETALING JAYA: RAM Rating Services Bhd has upgraded and reaffirmed the credit quality of three listed entities of YTL Group on the back of improved earnings and dividend paying capabilities, along with a proven operating track record.

The local credit rating agency has upgraded YTL Corp Bhd and YTL Power International Bhd’s outlook in the long term to “stable”, while Malayan Cement Bhd’s rating was reaffirmed as “stable”.

RAM Ratings reaffirmed the AA1 rating for YTL Corp’s RM2bil medium-term notes (MTN) programme (2013/2038), as well as its RM5bil commercial papers programme and MTN programme (2019/2044).

The outlook revision by the agency was mainly due to better earnings and easing of debt from its key utility arm, YTL Power.

The combined operating cash flow (OCF) to net debt coverage levels of YTL Corp is expected to be above 0.3 times supportive of the AA1 ratings. In June 2022, the OCF-to-net debt coverage ratio of the company came in at 0.27 times, exceeding expectations of 0.15 times.

RAM Ratings noted that YTL Corp had high liquidity, given its ability to monetise assets and investments to enhance the post-pandemic earnings recovery.

Under YTL Power’s cash reserve of RM6.83bil and company-level cash balance of RM742.37mil, YTL Corp has a stable liquidity profile. As at the end of June 2022, its debt level was RM6.6bil.

YTL Corp’s net realisable asset value was also taken into account, given the increasing value of YTL Power’s regulated assets over time and the group’s ability to generate cash flows from divestments of stakes in these entities.

Meanwhile, YTL Power received a boost in its cash flow following the disposal of its stake in ElectraNet Pty Ltd for RM1.3bil. The sale enabled the redeployment of capital to new businesses or investments and lowered its debt level.

Moreover, YTL Power also saw better earnings visibility on the back of a turnaround in its power-generation business in Singapore, as well as improved dividend paying capacities of its water and sewerage segments.

In June 2022, YTL Power’s OCF-to-net debt cover was 0.64 times from 0.51 times in 2021.

The company was backed also by RM6.83bil of cash reserves as at the end of June last year. Moving forward, RAM Ratings expects that figure to be more than 0.4 times, which commensurates with the AA1 ratings.

RAM Ratings attributed Malayan Cement’s profile as a big cement producer and retailer in Peninsular Malaysia as its main rating strength.

Revenue and pre-tax profit rose to RM2.7bil and RM129.2mil respectively in June 2022. Malayan Cement’s established market presence and various product offerings are expected to court more favourable selling prices for the company.