[RAM] RAM Ratings affirms Johor Corporation at AAA/Stable/P1

RAM Ratings has affirmed the AAA/Stable/P1 corporate credit ratings of Johor Corporation (JCorp or the Group). The AAA/Stable ratings of the Group’s RM3.5 bil Islamic Medium-Term Notes Programme and RM2 bil State-Guaranteed Programme have concurrently been affirmed. The RM2 bil programme is secured by an irrevocable and unconditional guarantee from the Johor state government.

As Johor’s state economic development corporation, JCorp plays a strategic role in shaping and spearheading sustainable socio-economic growth. Government support has been evident through guarantees and letters of undertaking for JCorp’s borrowings, among other means. JCorp is one of the few state agencies in Malaysia to benefit from government-guaranteed borrowings.

The ratings also consider the Group’s diversified business profile and the strong market positions of its healthcare operations and food & restaurant segment through its respective equity stakes in KPJ Healthcare Berhad (36%) and QSR Brands (M) Holdings Berhad (56%). Despite continued challenges in the food & restaurant segment owing to the weaker consumer sentiment, the overall financial impact was largely mitigated by the healthier performance of JCorp’s agribusiness, wellness & healthcare, and real estate & infrastructure divisions. The steady positive trajectory of these other core businesses should continue to cushion any residual weakness from the food & restaurant segment. While a major turnaround for QSR in the near term remains challenging, we view its long-term business prospects as fundamentally sound. 

JCorp’s standalone credit strength is weighed down by its financial profile. Its company-level interest coverage, typically supported by land sales and dividend income, has fluctuated between 1.4 times and 3.2 times in the last five years. While this metric strengthened to 2.55 times in FY Dec 2024 – lifted by the special dividend income following the listing of the Group’s plantation business – we anticipate this to moderate substantially this year in the absence of any major corporate exercises and expectations of a normalised dividend income stream. 

Nonetheless, the strong pipeline of prospective industrial land sales, enhanced by interest in the Johor-Singapore Special Economic Zone despite US tariff uncertainties, should help keep interest coverage levels largely above 1.5 times over the next few years. Temporary dips may still arise in the event of substantial delays in finalising land sales transactions. 

Other credit metrics are expected to remain comfortably range-bound over the next one to two years. The group-level operating cashflow debt cover is projected to stay within the historical range of 0.10 times-0.20 times. Both company and group-level gearing ratios moderated to a respective 0.71 times and 0.82 times as at end-December 2024, largely on the back of increased retained earnings (end-December 2023: 0.79 times and 0.90 times). These metrics stand to improve further, especially if JCorp’s intention to redeem around RM600 mil of outstanding sukuk ahead of maturity materialises as planned later this year.  


Analytical contacts
Hani Hamizah Nor Hashim
(603) 2708 8240
hani@ram.com.my

Thong Mun Wai
(603) 2708 8255
munwai@ram.com.my

Media contact
Sakinah Arifin 
(603) 2708 8212
sakinah@ram.com.my