RAM Ratings affirms Genting Plantations' AA2 ratings

RAM Ratings has affirmed Genting Plantations Berhad's (the Group) AA2/Stable/P1 corporate credit ratings and the AA2(s)/Stable rating of the RM1.5 bil Sukuk Murabahah Programme (2015/2030) and RM2.0 bil Sukuk Wakalah Programme (Perpetual) under the Group's wholly owned funding conduit, Benih Restu Berhad. The AA2(s)/Stable issue ratings reflect Genting Plantation's credit profile, given the irrevocable and unconditional corporate guarantee on the sukuk from the Group.

The ratings affirmation reflects our view that Genting Plantations' business will remain resilient, underpinned by its steady track record in plantation management. While overall debt is expected to trend upwards mainly to fund its proposed land acquisition (around RM593 mil) in Indonesia, we expect the Group's credit metrics to stay commensurate with the ratings assigned. RAM views the proposed land acquisition to be positive for the Group's business diversity, although financial contributions would likely be limited in the initial years. 

Over the period in review, the Group's financial performance came in largely within expectation. Its revenue and operating profit before depreciation, interest and tax (OPBDIT) declined to RM3.0 bil (FY Dec 2022: RM3.2 bil) and RM735.9 mil (FY Dec 2022: RM1.0 bil), respectively in FY Dec 2023 largely due to weaker crude palm oil (CPO) prices. The weaker downstream manufacturing division weighed on overall margins as operating environment stayed challenging. In 1H FY Dec 2024, the Group's OPBDIT was stronger at RM351.8 mil (+8.5% y-o-y) as higher CPO prices led to margin expansion in its mainstay business. Pre-tax profits were a respective RM384.1 mil and RM171.2 mil in fiscal 2023 and 1H fiscal 2024 (fiscal 2022: RM688.9 mil).  

Despite the weakened indicators, Genting Plantations' net gearing ratio and annualised funds from operations (FFO) net debt coverage remained conservative at 0.22 times and 0.5