[RAM] RAM Ratings affirms Dynasty Harmony's AA3/Stable issue rating

RAM Ratings has affirmed the AA3/Stable rating of the RM165 mil Islamic Medium-Term Notes (2018/2033) (the Sukuk) under Dynasty Harmony Sdn Bhd’s (Dynasty Harmony) RM300 mil Sukuk Programme (2018/2036). 

Dynasty Harmony is a wholly owned funding vehicle of GFM Services Berhad (GFM Services) and a sister company of KP Mukah Development Sdn Bhd (KP Mukah). The affirmation of the rating is premised on the transaction’s stable cash flow, adequate liquidity and healthy finance service coverage as measured by the subordinated finance service coverage ratio (sub-FSCR). KP Mukah is the holder of a concession to build and maintain the Universiti Teknologi MARA campus in Mukah, Sarawak from which it enjoys predictable concession cash flows. To service dues under the Sukuk, Dynasty Harmony is entirely dependent on dividend distributions from KP Mukah after the latter meets its own operational and financial obligations.

KP Mukah’s operating track record is commendable, with no maintenance service charge deduction recorded last year, allowing it to pay Dynasty Harmony RM10 mil of dividends. Combining the cash flows and cash reserves of both entities, the transaction sub-FSCR was a robust 1.85 times as at end-December 2023, exceeding our projections. 

Under RAM’s stressed analysis, KP Mukah is expected to channel RM242 mil of dividends to Dynasty Harmony for the remaining tenure of the Sukuk. This suggests that the transaction’s sub-FSCR will stay above the rating threshold until the Sukuk matures in 2033. A tight financing structure and restrictive covenants, including limitations on cost escalations and distributions to Dynasty Harmony shareholders, reduce the risk of cash leaks. 

As any compensation for concession termination at KP Mukah is not linked to the holders of the Sukuk, the transaction is exposed to termination risk. In the unlikely event of a default by KP Mukah, compensation from the government will only address the repayment of a financing facility under KP Mukah. Holders of the Sukuk may pursue recovery, though limited, via advances extended to GFM Services. 


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Liew Kar Ling
(603) 3385 2586
karling@ram.com.my

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

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