RAM reaffirms ratings of Aquasar Capital's RM1.5b sukuk
Published on 02 Oct 2019. | Source: thestar.com.my
KUALA LUMPUR: RAM Ratings has reaffirmed the AAA(s)/Stable rating of Aquasar Capital Sdn Bhd’s RM1.50bil sukuk murabahah programme (2014/2029).
It said in a statement on Wednesday Aquasar Capital acts as the Sarawak government’s funding conduit for the sukuk programme to fund the development of the Kuching Centralised Sewerage System.
“The operations and maintenance of the project has no bearing on Aquasar Capital’s repayment of the sukuk, ” it said.
RAM Rating said although the Sarawak government has not extended an explicit guarantee to Aquasar Capital over the sukuk, the issue rating reflects Sarawak’s credit strength, as periodic payments for outstanding sukuk are borne by the state through budgetary appropriation.
“The reaffirmation of the rating is based on Sarawak’s strong financial position, underpinned by ample fiscal reserves amounting to RM30bil as at end-2017 (end-2013: RM23bil), that serve as a strong anchor against commodity price volatility in view of the state’s heavy reliance on natural resources for GDP growth and fiscal revenue.
“These reserves provide a comfortable coverage of 3.8 times the state’s hefty total adjusted debts of RM7.84 bil as at end-2017, with a similar coverage level maintained in 2018, ” it said.
RA Rating pointed Sarawak’s fiscal revenue is the highest of all Malaysian states, with large receipts from hydrocarbon royalties, dividends from investments in oil and gas downstream companies and additional sources provided for by the Federal Constitution such as duties and sales taxes.
“While the scope of the sales tax has been widened to include hydrocarbon-related products beginning 2019, the actual collection in the current year remains unclear at this juncture pending the outcome of federal-state negotiations on Sarawak’s rights and autonomy.
“This poses potential risks to the state’s fiscal and economic outlook, given that its expanded Budget 2019 hinges substantially on higher projected revenue – mainly from increased tax collection – to fund a larger development expenditure, ” it said.
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