[RAM] RAM Ratings assigns AAA(s) to Abraj's Amanah Raya guaranteed IMTN Programme

RAM Ratings has assigned AAA(s)/Stable rating to the proposed RM3 bil Islamic Medium-Term Notes Programme (2025/2055) (the Programme) issued by Abraj Sdn Bhd (Abraj or the Issuer). The suffix to the Programme’s rating reflects the unconditional and irrevocable guarantee from Amanah Raya Berhad (ARB or the Group) to meet the Issuer’s financial obligations under the Programme as and when due.

Abraj is a wholly owned company, managed and held in trust by ARB for Kumpulan Wang Bersama (Common Fund). Effectively owned by the Government via the Minister of Finance (MoF) Incorporated, ARB provides an essential role as public trustee and official administrator of the estates of deceased persons, operating under the Public Trust Corporation Act 1995 (the Act). The Government has clear control over ARB, with influence over its strategies and key decisions. Given the legislated mandate and integral relationship, RAM’s rating assessment for ARB considers an ‘almost certain’ likelihood of extraordinary government support, as demonstrated by past support. As such, ARB’s credit profile, and by extension, the Issue rating mirrors that of the sovereign.

The government via MoF has issued annual letters of support, to ensure that ARB will be able to carry out its fiduciary functions in the event it is not able to meet its liabilities. This support allays significant doubts on the Group’s going-concern due to RM1.0 bil of potential liability arising from the accumulated losses of its RM7.75 bil Common Fund as at end-December 2024, and the fund’s severe asset-liability mismatch. Under the Act, ARB is liable to make good any claims if there is a shortfall in the Common Fund. 

The Group recently underwent a revamp of leadership to improve governance and performance, notably to address the Common Fund’s accumulated losses and liquidity mismatch. In FY Dec 2024, the Common Fund achieved a return on investment of 6.1%, its highest in more than a decade. ARB intends to use the proceeds from the Programme to replace maturing deposits in the Common Fund, reducing their costs and lengthening maturity.

ARB, through its subsidiaries, also offers corporate trusteeship as well as manages funds and real estate investment trust. These services, together with their social policy role, contribute the bulk of its revenue which has risen at a compounded annual growth rate of 1.7% since FY Dec 2020 to RM165.01 mil in FY Dec 2024. Operating profit before depreciation, interest and tax margins were healthy, staying mostly above 30% in recent years. Likewise, funds from operations debt coverage for fiscal 2024 was healthy at 0.17 times. Investments in discontinued legacy businesses (property development and money lending) on behalf of the Common Fund are recognised as borrowings and constitute most of RM229.37 mil debt load; gearing and net gearing ratios stood at respective 0.92 times and 0.12 times as at end-December 2024. The Group anticipates total borrowings to gradually decline in line with ongoing efforts to recover and dispose assets of the discontinued businesses.


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