[RAM] RAM Ratings affirms SMJ Energy's AAA sukuk ratings

RAM Ratings has affirmed SMJ Energy Sdn Bhd’s (SMJE or the Group, formerly known as SMJ Sdn Bhd) AAA/Stable rating of its Multi-Currency Islamic Medium Term Notes (Sukuk Wakalah) Programme of up to RM10.0 billion. The rating is supported by SMJE’s highly strategic role to Sabah, continued strong state government support as well as its strong cashflow generation.

SMJE was established as Sabah’s state-owned oil and gas company pursuant to the Commercial Collaboration Agreement between the Sabah state government and PETRONAS. SMJE has a robust mandate to oversee the development of the state’s oil and gas resources, to obtain a greater share of revenues for the Sabah state government, and to help Sabah achieve energy security. It is one of the identified state-owned entities that will play a key role to meet the strategic goals under the Sabah Energy Roadmap and Master Plan 2040. Some of its key tasks include securing the state’s energy security by establishing policy for indigenous energy resources, developing an integrated gas master plan, and implementing energy subsidies rationalisation plan. SMJE's growing involvement in the Sabah oil and gas sector is also expected to help attract foreign direct investments. 

In 2023, SMJE completed the acquisition of a 50% participating interest in the Samarang Production Sharing Contract as well as a 25% stake in PETRONAS Chemicals Fertiliser Sabah Sdn Bhd from Petroliam Nasional Berhad (PETRONAS). The Group also completed the acquisition of a 100% stake in Sabah International Petroleum Sdn Bhd, which included a 10% equity interest in Petronas LNG9 Sdn Bhd, from Sabah Development Berhad in October 2023. 

The proceeds from the RM900 mil sukuk issued in October 2023 were used to fund costs in relation to the acquisition of SIP. Although SMJE’s gearing stood at a relatively high 1.12 times as at end-December 2023, the Group’s net operating cashflow (OCF) debt cover came in at a strong 0.45 times, supported by robust cashflow generation. In FY Dec 2023, SMJE’s revenue and OCF reached a commendable RM952.37 mil and RM695.11 mil, supported by the full year contributions from all assets. SMJE paid RM50 mil dividends to the State Government in 2023.

SMJE continues to negotiate with PETRONAS on the acquisition of additional oil & gas assets. Although the Group may require debt funding to fund the acquisitions and development of these assets, they are expected to be self-sustaining and are expected to contribute positively to SMJE.


Analytical contacts
Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my

Darrel Tiang
(603) 3385 2531
darrel@ram.com.my

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