[RAM] RAM Ratings revises Encorp Systembilt's sukuk outlook to positive, affirms AA1 rating

RAM Ratings has revised the outlook on Encorp Systembilt Sdn Bhd’s (Encorp or the Company) RM1.575 bil Sukuk Murabahah (2012/2028) to positive from stable and affirmed its AA₁ rating.

The revised outlook reflects an improved credit profile, as indicated by a projected-stressed annual minimum finance service coverage ratio (FSCR), inclusive of cash balances, which is increasingly aligned with levels commensurate with an AAA rating. Stable monthly concession receipts from the Government of Malaysia and higher interest income from large cash reserves could support an upgrade to AAA next year.

The rating affirmation continues to rest on the transaction’s strong debt-servicing capacity, backed by monthly contractual payments of RM11.40 mil (RM136.80 mil annually). These payments arise from the construction and financing of 10,000 teachers’ quarters nationwide, completed in 2004, and are not subject to performance-related deductions in the absence of operating and maintenance obligations.

The transaction FSCRs were 1.92 times and 1.89 times in May and November 2025, respectively, exceeding RAM’s projections, driven by the timely receipt of concession payments and higher interest income, against our stressed assumption of a three-month payment delay. We project stressed FSCRs, inclusive of cash balance, to remain at or above the 1.80 times threshold required for an AAA rating over the remaining tenure of the sukuk by next year (management’s base case: minimum of 2.02 times). Structural protections support cash retention and limit leakage, including restrictions on shareholder distributions and additional indebtedness, as well as covenanted cost limits.

Any expenses exceeding allowable limits are expected to be absorbed by Encorp Berhad, the Company’s ultimate parent, consistent with historical practice. Counterparty risk in respect of concession payments is minimal as the government is the ultimate obligor. While the final sukuk tranche matures three months after the concession ends in February 2028, Encorp’s projected cash balances under our stress scenario are assessed to be sufficient to meet the outstanding principal.

The risk of concession termination is deemed remote and sukukholders are protected by the transaction structure that preserves payment continuity in the event of a company default.


Analytical contacts
Lai Jing Wei 
(603) 2708 8239  
jingwei@ram.com.my

Davinder Kaur Gill
(603) 2708 8220
davinder@ram.com.my

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