RAM Ratings has affirmed its AA1/Stable rating of SEP Resources (M) Sdn Bhd's (SEP or the Company) RM185 mil ASEAN Sustainability SRI Sukuk Wakalah (2024/2036) (SRI Sukuk). The affirmation is premised on the transaction's robust debt coverage that is supported by stable and adequate payments to service sukuk obligations. 

As a non-operating holding company, SEP's sukuk repayment depends entirely on the concession cash flows from its wholly owned subsidiary, Budaya Positif Sdn Bhd. The long-dated University Malaysia Perlis (UniMAP) concession for the development and maintenance of student hostels in Padang Siding, Perlis provides stable cash flow visibility to support obligations. Stringent and restrictive covenants and financing terms around indebtedness, costs and distributions to shareholders' safeguard creditor interests and instil financial discipline. We view SEP and Budaya Positif as a single economic entity for rating purposes.

In 2025, BPSB's operating performance remained robust, with an average monthly key performance indicator score of 86% and negligible deductions (less than 1% of annual Maintenance Service Charges received). The risk of non-performance is viewed to be low, given the non-complex nature of hostel maintenance work. SEP's debt coverage is bolstered by cash reserves of RM46.1 mil as at end-March 2026 and projected annual pre-financing cash flows of around RM20 mil. This strong financial profile is expected to be maintained even under RAM's stressed assumptions of delayed payments and higher costs with the Company's finance service coverage ratios (FSCRs) projected to register at a minimum and average 1.75 times and 2.16 times, respectively, for the remaining tenure of the SRI Sukuk. We note that FSCRs have been gradually improving on the back of higher interest income and could support a rating upgrade to AAA in the coming years should FSCRs register a minimum 1.80 times over a sustained period. 

Balancing these strengths is SEP's h