[RAM] RAM Ratings affirms UniTapah's AAA/Stable issue rating

RAM Ratings has affirmed the AAA/Stable rating of UniTapah Sdn Bhd’s (the Company) Sukuk Murabahah of up to RM600 mil (2014/2035) (the Sukuk) in view of the Company’s steady cashflow and robust debt coverage. We expect the Company’s debt-servicing capacity to stay strong, underpinned by predictable and prompt concession payments from Universiti Teknologi MARA (UiTM) and its continued good performance in campus maintenance.

UniTapah was tasked with developing and maintaining the UiTM campus in Tapah, Perak under a 23-year concession. In accordance with the concession agreement, the Company received fixed monthly payments of availability charges and maintenance charges in a timely manner throughout 2023. UniTapah’s maintenance track record has been excellent and penalties incurred for underperformance have been negligible over the last few years. Maintenance is undertaken externally through Everfine FMS Sdn Bhd, a subsidiary of listed GFM Services Berhad.

Notwithstanding assumptions of a delay in the receipt of concession payments, zero maintenance margins and lower annual interest income (on cash reserves) in our stressed scenario, the Company’s finance service coverage ratios (FSCRs, with cash balances) are expected to remain robust at above 1.80 times – levels that will comfortably anchor the rating.

The sukukholders’ interests are safeguarded by the transaction’s financing structure and restrictive covenants which prohibit distributions to shareholders, and the defined administration of designated accounts to minimise leakages. As a result, any cashflow outperformance relative to our stressed analysis adds to its cash reserves, contributing to better debt repayment capacity, as measured by FSCRs. Counterparty risk is deemed low as the Government of Malaysia, via UiTM, is the ultimate obligor of concession payments.

As with most concession-based transactions, UniTapah is exposed to concession termination risk. While the compensation mechanism is spelt out, risk arises from potential delays in receiving reimbursements. In any case, termination is viewed as remote, considering the Company’s good operational history and the non-complex nature of the maintenance work. 


Analytical contacts
Hani Hamizah Nor Hashim 
(603) 3385 2575
hani@ram.com.my

Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my

Media contact
Sakinah Arifin 
(603) 3385 2500
sakinah@ram.com.my