RAM Ratings has reaffirmed the AAA(s)/Stable rating of Aquasar Capital Sdn Bhd's RM1,500 million Sukuk Murabahah Programme (2014/2029). 

Aquasar Capital acts as the Sarawak government's funding conduit for the sukuk programme to fund the development of the Kuching Centralised Sewerage System. While the state government has not extended an explicit guarantee to Aquasar Capital in respect of the sukuk, the issue rating reflects Sarawak's credit strength as periodic principal and profit payments are borne by the state government through annual budgetary appropriation. 

The reaffirmation of the rating is based on Sarawak's strong financial position, underpinned by ample fiscal reserves of RM25.1 bil as at July 2021 which comfortably cover hefty total adjusted debts amounting to RM12.7 bil. Sarawak's fiscal revenue is the largest of all Malaysian states, with sizeable receipts from (1) hydrocarbon royalties, (2) dividends on investments in downstream oil and gas companies, and (3) additional revenue sources provided for by the Federal Constitution such as duties and sales taxes. The recent implementation of the State Sales Tax on petroleum products has significantly expanded the state's already broad revenue base.

The Sarawak economy is expected to rebound strongly from the severe impact of the COVID-19 pandemic in view of the state government's significant policy support measures and an accelerated vaccination rate.

The rating may come under pressure in the event of persistently low commodity prices and/or a marked increase in committed debt and liabilities that materially impact Sarawak's fiscal position. The state's ambitious medium-term development programme may require funding in the future. We take cognisance of the state government's fiscal discipline in managing its liabilities.

 

Analytical contact
Jason Fong
(603) 3385 2616
[email protected]

 

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as i