[RAM] RAM Ratings affirms YTLPI's AA1 ratings

RAM Ratings has affirmed the AA1/Stable ratings of YTL Power International Berhad’s (YTLPI or the Group) RM5 bil Medium-Term Notes Programme (2011/2036) and RM2.5 bil Sukuk Murabahah Facility (2017/2027). Concurrently, we have affirmed the AA1/Stable/P1 ratings of its RM7.5 bil Islamic Commercial Papers Programme (2023/2030) and Perpetual Islamic Medium-Term Notes Programme.  

The ratings reflect YTLPI’s solid business profile as a diversified multi-utility provider, operating on two continents and in multiple business lines. Its sturdy track record in concession businesses, superior liquidity position and strong financial flexibility complement its favourable business profile, providing it with financial buffers and leverage headroom. YTLPI’s company-level debt coverage levels, as measured by operating cashflow (OCF) to net debt coverage, will remain sound at a minimum 0.80 times in the immediate years, commensurate with an AA1 rating. The company-level OCF to net debt coverage exceeded our expectations at 0.84 times for FY June 2023 (FY June 2022: 0.64 times).

Moderating the ratings is the Group’s hefty debt load, the bulk of which comprises concession-related non-recourse debts. Regulatory changes and industry challenges have also weighed on the earnings of some of its business segments. Looking ahead, execution risks stem from the Group’s expansion into new businesses but we take comfort from its proven investment capabilities and track record. Further, the Group has a track record of monetising assets, as seen in the disposal of an associate stake in ElectraNet Pty Ltd in fiscal 2022 which yielded net proceeds of almost RM2 bil.

Operating profit before depreciation, interest and tax jumped 155% in FY June 2023 while pre-tax profit was up 49% at an all-time high of RM2.45 bil, boosted by the stellar performance of YTLPI’s power generation business in Singapore. As at end-June 2023, YTLPI had close to RM8 bil of unencumbered cash reserves, while its asset base – as measured by the net realisable asset value (RNAV, calculated net of liabilities) – is sizeable.

Despite some concentration, asset and earnings diversity has improved following recent developments such as the full completion of the Group’s power plant in Jordan (45%-owned) in May 2023. While YTLPI remains focused on infrastructure and utilities as core assets, it has expanded further into technology and renewable energy (solar-powered data center and digital bank segments, among others). To this end, the Group – in December 2023 – announced a collaboration with US-based technology company, Nvidia Corporation, to build artificial intelligence (AI) infrastructure at its data center park in Johor, utilising Nvidia’s AI chips and software. In our view, this will give YTLPI a first-mover advantage and further improve asset and earnings diversity over the longer term.


Analytical contacts
Karin Koh, CFA
(603) 3385 2508
karin@ram.com.my

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

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