RAM Ratings has affirmed the AA1(s)/Stable rating of UEM Group Berhad's (UEM or the Group) RM7.0 bil Sukuk Wakalah Programme, issued through wholly owned funding vehicle, UEM Olive Capital Berhad (UEM Olive).

The affirmation reflects our expectations that UEM will continue to enjoy a 'high' likelihood of extraordinary support from its parent, Khazanah Nasional Berhad (Khazanah). Our assessment takes note of UEM's designated role as Khazanah's infrastructure and green investment arm. Khazanah's transfer of its 32.99% stake in Malaysia Airports Holdings Berhad (MAHB) to a wholly owned subsidiary of UEM in May 2024 reinforces this role. As a fully-owned subsidiary of Khazanah, UEM also holds other key strategic assets of the government.

UEM's standalone credit profile remains anchored by its diversified business profile and leading market positions of its operating entities in the property, cement, asset and facility management (AFM) and airport operation sectors. The Group's core pre-tax profit improved to a respective RM323.93 mil and RM283.95 mil in FY Dec 2023 and 1H FY Dec 2024, mainly attributed to the turnaround of its cement arm. Its adjusted consolidated operating cashflow debt coverage (excluding concession-related debts) was largely unchanged at 0.10 times last year (fiscal 2022: 0.11 times). Going forward, the ratio is expected to strengthen on the back of better earnings prospects of the Group's property, cement and AFM operations.

UEM's company-level cashflow interest coverage ratio is expected to hover around 4 times in the next few years (1H FY Dec 2024: 4.7 times) following a recent RM600 mil drawdown on the sukuk programme. Company-level gearing is estimated to remain below 0.20 times (end-June 2024: 0.07 times). These credit metrics, coupled with the strong business profile, are still supportive of the Group's rating.

The (s) modifier attached to UEM Olive's issue rating reflects the Group's credit profile as the Sukuk Wakalah structure p