[RAM] RAM Ratings assigns preliminary first-time AA3 ratings to Qualitas Medical Limited's vehicles

RAM Ratings has assigned preliminary AA₃ ratings to Ameetaz Capital Sdn Bhd (Ameetaz Capital), the holding company of Qualitas Medical Limited (Qualitas or the Group) and its special purpose funding vehicle, Qualitas Sukuk Berhad (Qualitas Sukuk) for the proposed RM2.5 bil Senior Islamic Medium-Term Notes and Subordinated Perpetual Islamic Notes Programme (Sukuk Programme).



Incorporated in Singapore, Qualitas is a regional primary healthcare provider with established presence in Malaysia, Singapore and Australia. It has a long operating history dating back to 1997. The Group operates a range of general practice clinics, dental clinics, medical imaging centres, therapy and rehabilitation centres, ambulatory care centres and specialist eyecare centres. Dato’ Dr Noorul Ameen Mohamed Ishack, the founder of Qualitas and Southern Capital Group (SCG) are the ultimate shareholders of the Group, owning a collective 78.7%. Sojitz Corporation, a Japanese investment holding company holds the remaining 21.3% stake.

Ameetaz Sdn Bhd (Ameetaz), Ameetaz Capital and Qualitas Sukuk as well as the proposed Programme were set up as part of a larger corporate reorganisation exercise, to facilitate long term funding of Qualitas’s growth and prepare for its eventual listing. The proposed reorganisation exercise, expected to be concluded by 1Q 2025 (Figure 1) will result in Ameetaz Capital, via QML Shares SPV, acquiring 78.7% of Qualitas. The acquisition will be satisfied in cash and redeemable convertible preference shares (RCPS) to be issued by Ameetaz to the vendors. At the same time, Ameetaz Capital will recognise an advance from Ameetaz equivalent in amount to the RCPS. Most of the RCPS and advances from Ameetaz, along with any dividend or interest payments, will be subordinated to the proposed Programme. The indicative initial issuance of SGD205 mil (or RM-equivalent) from the Programme will fund the cash portion of the acquisition and an SGD101 mil advanced to Qualitas to refinance its existing borrowings, with the balance used to defray transaction expenses.

Figure 1. Qualitas’ corporate structure post-reorganisation


The AA₃/Stable/P1 corporate ratings assigned to Ameetaz Capital reflect the credit strength of Qualitas as its core subsidiary. Qualitas has a robust market position across its core markets.  As of end-September 2024, the Group owned 125 facilities in Malaysia, 53 in Australia and 27 in Singapore, along with another 148 affiliate and associate clinics in Malaysia. RAM views the resilient and encouraging long-term growth prospects for private outpatient care in these markets as a positive rating factor. This is demonstrated by Qualitas’ consistently stable cash flow generation and strong debt coverage ranging between 0.15 to 0.21 times in the last five years. 

Over the next few years, the Group is set to accelerate its pace of expansion – especially into new businesses and large healthcare chains – underscoring the need for the Group to maintain prudent risk management of future acquisitions. This is pertinent given the Group’s sizeable goodwill, for which major failed acquisitions could have an outsized impact on the balance sheet. We take comfort from Qualitas’ experienced management team that has over a decade of successfully undertaken past acquisitions and the planned M&As of brownfield healthcare centres which are anticipated to have stabilised cashflows.

In our financial analysis, we considered the management’s plans for future acquisitions to be funded by subordinated perpetual sukuk, for which we have assigned 50% equity credit and the RCPS to be structured as fully equity in nature, as targeted under the transaction. 

Given the expected concurrent rise in debts and equity, as well as earnings accretive acquisitions, Ameetaz Capital’s adjusted gearing is anticipated to gradually improve to about 0.75 times by end-2027 from 0.86 times post-corporate exercise and the Group’s debt-to OPBDIT ratio, a supplementary leverage ratio, moderating to 3.5 times. Though gearing levels are higher than comparable rated peers, we consider this manageable given the defensive nature of the sector and the anticipated earnings stability from its expanding operations. Our scenario analysis indicates that forward debt coverage is likely to temporarily dip to 0.19 times (from 0.23 in FY Dec 2023) before gradually improving to 0.24 times by 2027, supported by rising earnings despite the higher debt levels projected under the Sukuk programme. 

The ratings are constrained by the Group’s aggressive expansion strategy, relatively elevated gearing levels and exposure to foreign exchange risks due to its operations in three countries. RAM will assign the final ratings once we have reviewed and are satisfied with the terms of the hybrid instruments and accompanying financing documentation that align with assumptions on which the preliminary ratings were based. 


Analytical contacts
Ben Inn
(603) 3385 2510
ben@ram.com.my

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

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