RAM Scores reaffirms AA3/steady score of Pahang’s company’s RM650m Sukuk


KUALA LUMPUR: RAM Scores has reaffirmed the AA3(s)/Secure score of Perbadanan Kemajuan Pertanian Negeri Pahang’s (PKPP) RM650mil Sukuk Wakalah Programme (2020/2050).

It mentioned in a press release the score is supported by the company’s strong stability sheet and liquidity place, its key function in supporting agricultural improvement in Pahang, and monetary flexibility derived from the Pahang State Authorities.

The score additionally enjoys a one-notch enhancement because the sukuk is secured towards plantation belongings, underneath RAM’s standards for well-secured debt.

Based mostly on the final appraised market worth of the pledged collateral, RAM mentioned safety cowl stood at 1.99 instances the excellent quantity, greater than the required 1.67 instances minimal Safety Cowl Ratio covenanted underneath the programme.

Nonetheless, moderating these elements are the company’s comparatively small measurement and lack of scale efficiencies, high-cost construction and weak plantation working metrics.

PKPP was arrange as a statutory physique, with its foremost goal to make sure the event of Pahang’s agricultural sector.

The company is tasked with enhancing the residing requirements of the agricultural group by offering the requisite infrastructure for agricultural actions and implementing entrepreneur improvement programmes.

Additionally it is dedicated to supporting the state’s initiatives and entities (together with these that are non-agricultural associated), to which it has contributed greater than RM100 mil within the final six years.

RAM identified the company is a comparatively small oil palm planter, with its plantation operations broadly divided into industrial and social segments.

As at finish March 2021, PKPP’s complete planted hectarage expanded to about 55,000 ha following its profitable acquisition of about 16,500 ha of oil palm estates in November 2020.

Its social plantations stay at round 5,127 ha (9%) of complete oil palm planted space.

PKPP has a big portion of ageing bushes, which not solely impacts yields of recent fruit bunches (FFB) and crude palm oil, but additionally elevates its unit prices.

Whereas the general tree age profile improved following the current acquisition, uplift in FFB yields had been under expectations as a result of comparatively poor manuring standing of the acquired estates.

“Nonetheless, we anticipate the brand new estates to contribute favourably as soon as they’ve been rehabilitated.

“Within the meantime, PKPP continues to step up its replanting program and mechanisation efforts to enhance its tree growing older profile in addition to assist ease its power labour scarcity points,” it mentioned.

RAM identified the motion restrictions imposed by the federal government to fight the COVID-19 pandemic has worsened the power labour shortages for PKPP.

The company has been working at roughly half of its required workforce because the onset of the pandemic, inflicting a big decline to its FFB manufacturing in 2020 (decline of 10.7% y-o-y).

“Regardless of the decrease manufacturing yield, PKPP recorded an 18.8% y-o-y enhance in income, outperforming our earlier projections for FY Dec 2020 by 21%.

“Likewise, PKPP managed to document its first optimistic working revenue earlier than depreciation, curiosity and tax (OPBDIT) in FY Dec 2020 after two years being within the purple.

“Nonetheless, its margin was compressed at 12.13% as in comparison with pre-2018 ranges (common OPBDIT margin for 2015-2017: 22.3%) on account of elevated operational and administrative bills in the course of the 12 months,” RAM identified.

Supported by substantial money reserves of greater than RM500mil, PKPP is predicted to keep up its sturdy stability sheet and wholesome liquidity place, regardless of borrowings spiking up this 12 months following the issuance of its Sukuk Wakalah in October 2020.

“We anticipate the Company’s debt load to hover round RM660 mil by fiscal 2022, with gearing ratio anticipated to stay under 0.3 instances over the identical interval.

“With excessive CPO costs forecasted into the medium time period, the company’s funds from operations (FFO) debt protection is predicted to enhance to 0.3 instances in FY Dec 2021, and return to a web money place over the following three years.

“Even with decrease projected CPO costs underneath our sensitivity evaluation, the Company is predicted to keep up FFO debt protection ratio of at the very least 0.11 instances over the identical interval. On a web debt foundation, PKPP’s debt coverages are considered to be very strong,’ RAM mentioned.

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