[RAM] RAM Ratings affirms PKNS's AA3/P1 issue ratings

RAM Ratings has affirmed the respective AA3/Stable and P1 ratings of Perbadanan Kemajuan Negeri Selangor’s (PKNS or the Agency) perpetual RM3 bil Islamic Medium-Term Notes Programme (2021/-) and RM1 bil Islamic Commercial Paper Programme (2021/2028).    

The ratings are based on our view that the Agency – as a government linked-entity – will remain an important conduit for the Selangor state government (SSG) and accordingly, expect it to receive state extraordinary support if required. In recent years, the SSG has supported PKNS’s investment and financial needs through funding for a power plant project and a soft loan to address liquidity shortfalls during the pandemic. The management also recently shared the SSG intends to award land, earmarked for the planned construction of a new port in Pulau Carey, Klang. The development of Port Carey and Carey Selangor, a proposed 6,000-hectare Special Economic Zone development in Pulau Carey are just some of the major projects identified under the State’s Rancangan Selangor Pertama (RS-1 or the First Selangor Plan). We will continue to monitor the progress of these developments and reassess the support assessment given to PKNS from time-to-time, depending on how it evolves beyond its core role as a property developer.  

In FY Dec 2022, PKNS’s revenue and operating profit before depreciation, interest and tax nearly halved from the prior year’s levels, given the absence of substantial land disposals, subdued project launches and the tapering of sales of unsold inventory. Pre-tax profit was however boosted by a one-off contribution from the disposal of associate company Kesas Sdn Bhd. PKNS’s adjusted funds from operations debt coverage (FFODC) moderated to 0.07 times in FY Dec 2022 (FY Dec 2021: 0.09 times).

In view of a weak 1H fiscal 2023 showing, the Agency’s financial performance is expected to be relatively muted for full-year 2023, though its bottom line will be propped up by a land sale valued at nearly RM200 mil which was closed in December 2023. A pickup in property launches in 2024 and the progressive reduction of unsold inventory will support PKNS’s cashflow generation in the medium term. Sizeable cash reserves will also support the bulk of near-term working capital and capital expenditure needs for upcoming and ongoing projects. 

Excluding non-recourse project debt for the construction of a power plant under Pulau Indah Power Plant Sdn Bhd, PKNS’s adjusted debt and gearing inched down to RM2.5 bil and 0.40 times, respectively, as at end-June 2023 (end-December 2022: RM2.7 bil and 0.41 times). We anticipate a relatively small debt increase of around RM250 mil over the next two years, largely earmarked for a new waste-to-energy power project. Accordingly, adjusted gearing and FFODC will hover at around 0.40 times-0.45 times and 0.05 times-0.10 times, respectively, during the period. We have not accorded any benefit to proceeds expected from the ongoing sale of 3,390 acres of land in Bernam Jaya, given the continued delay in fully closing the transaction. 


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Hani Hamizah Nor Hashim
(603) 3385 2575
hani@ram.com.my

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

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Sakinah Arifin
(603) 3385 2500
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