Malaysia: RAM Ratings reaffirms AA1/Stable rating of SEB’s sukuk

KUCHING: RAM Ratings has reaffirmed the AA1/Stable rating of Sarawak Energy Bhd’s (SEB) sukuk musyarakah programme of up to RM15 billion (2011/2036).

According to a press statement, the reaffirmation of the rating reflects the strong support that SEB continues to enjoy from the Sarawak State and Federal Governments, given its pivotal role in the Sarawak Corridor of Renewable Energy (SCORE).

RAM viewed that the group to benefit from a “very high” likelihood of support from the Sarawak State Government in the event of financial distress, based on its rating methodology for government-linked entities. Notably, SEB’s financial profile remained in line with the rating agency’s expectations.

The rating is moderated by the group’s weak balance sheet and debt-servicing ability. In line with its hefty capitak expenditure (capex) programme, SEB’s debt load stood at RM6.1 billion as at end-of financial year 2013 (end-FY12 at RM6.28 billion).

“As a result of the lower debt level, SEB’s adjusted gearing ratio improved slightly to 3.44 times (FY12 at 3.71 times) while its adjusted funds from operations debt coverage (FFODC) remained relatively unchanged at 0.07 times (FY12 at 0.06 times).

“Its adjusted gearing ratio is projected to peak at 3.65 times in fiscal 2014 and its adjusted FFODC to improve slightly, averaging around 0.13 times between fiscal 2014 and 2018 as the hroup manages its costs and capex in accordance with its revised expectation of slower pace of customer demand,” it said.

RAM Ratings pointed out, “SEB remains exposed to demand risk, given the progressive take-up of power by SCORE customers relative to its immediate capacity expansion with the Bakun (2,400-MW) and Murum (944-MW) hydro plants.

“We note that a total of 2,100-MW of combined capacity has been met by committed demand from firm SCORE and export customers.”

Elsewhere, it noted SEB is inherently exposed to power-supply concentration risk as about 59 per cent of its current power supply emanates from the Bakun plant, which is owned by the Federal Government (via Sarawak Hidro Sdn Bhd).

“Reliance on Bakun is expected to be moderated when the Murum plant comes onstream in 2015. Any major interruption in power supply could undermine the state’s power system security and pose a challenge to SEB in negotiations with potential SCORE customers.

“However, we draw some comfort to learn that thegroup managed to secure new power purchase agreements and term sheets subsequent to the June 2013 blackout in Sarawak,” it commented.

(Borneo Post Online / 01 September 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Qatar: Islamic banks outperform conventional peers

DOHA: The Islamic banks in Qatar outpaced conventional banks in the country in terms of growth in net profit during the second quarter of 2014 (Q2,14).

Qatar Islamic Bank (QIB) reported a 15.0 percent YoY bottom-line growth in Q2, 14, mainly due to improvement in top-line as well as fee income. Top-line growth was backed by strong financing growth.

Masraf Al Rayan reported 12.1 percent YoY growth in its bottom-line due to strong growth in net financing income,  Global Investment House (GIH) noted in its Q2, 14 “GCC Banking Sector” analysis.

The GIH analysts who covered five major Qatar-based banks   said the loan books of banks in Qatar grew the most in the region, by registering 15.4 percent growth on year-on-year basis, followed by the banks in Saudi Arabia (9 percent), UAE (4.8 percent) and Kuwait (4.6 percent).  

Due to stable growth in loan book, net interest income (NII) of GCC banks rose 4.3 percent YoY. Qatar’s NII grew by 2.9 percent. NII growth was led by UAE-based banks (8.2 percent YoY), followed by those in  Saudi Arabia (7.3 percent. NII of Kuwait declined 6.8 percent.

The asset base of GCC banks expanded by 9.5 percent YoY to $1.11 trillionn in 2Q14, with all the countries witnessing stable YoY growth. Increase in loan book supported the overall asset growth. Qatar-based banks witnessed the strongest growth in total assets (13.9 percent YoY), followed by banks in Kuwait (8.9 percent ), Saudi Arabia (8.7 percent ) and UAE (7.7 percent )

Net earnings of  GCC banks under GIH coverage increased 11.1 percent YoY to $5.3bn in 2Q14, mostly due to higher NII non-interest income and a 7.7 percent YoY drop in provisions;though4.6 percent YoY increase in operating expenses (opex) partially dampened the profit growth. Net profit of banks in the Kuwait and UAE increased by 20.7 percent  and 20.1 percent YoY, respectively while net profit of Saudi Arabia and Qatar based banks increased decently by 7.4 percent and 3.5 percent , respectively.  On QoQ basis,  net profit  of  the GCC aggregate  increased  5.4  percent, with Saudi Arabia and UAE (7.9 percent each) , followed by  Qatar (6.0  percent) ;  while  Kuwait witnessed a 14.9 percent decline in net profit on QoQ basis.

Qatar-based banks maintained their loan growth momentum due to an increase in public sector spending backed by several developmental initiatives taken by the government.

Among Qatar -based banks, Commercial Bank of Qatar, Qatar Islamic Bank and Doha Bank registered higher growth in loan book of 33.4 percent, 31.8 percent and 25.3 percent YoY, respectively.

Provision expenses of  GCC banks under GIH coverage declined 7.7 percent YoY during  Q14; however, increased 14.0 percent QoQ. Banks in Qatar witnessed 21.2 percent YoY plunge in provisions. Provisions of Qatar National Bank reduced by 56.4 percent YoY during the quarter.

(The Peninsula / 31 August 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com