KUALA LUMPUR: RAM Ratings has reaffirmed the AA3(s)/stable rating of Perbadanan Kemajuan Pertanian Negeri Pahang’s (PKPP) RM650mil sukuk wakalah programme (2020/2050).
It said in a statement that the rating is supported by the agency’s robust balance sheet and liquidity position, key role in supporting agricultural development in Pahang, and financial flexibility derived from the Pahang state government.
The rating has a one-notch enhancement as the sukuk is secured against plantation assets, under RAM’s criteria for well-secured debt.
Based on the last appraised market value of the pledged collateral, RAM said security cover stood at 1.99 times the outstanding amount, more than the required 1.67 times minimum security cover ratio covenanted under the programme.
However, moderating these factors are the agency’s relatively small size and lack of scale efficiencies, high-cost structure and weak plantation operating metrics.
PKPP was set up as a statutory body, with its main objective to ensure the development of Pahang’s agricultural sector.
The agency is tasked with improving the living standard of the rural community by providing the requisite infrastructure for agricultural activities and implementing entrepreneur development programmes.
It is also committed to supporting the state’s projects and entities (including those which are non-agricultural related), to which it has contributed more than RM100mil in the last six years.
RAM pointed out the agency is a relatively small oil palm planter, with its plantation operations broadly divided into commercial and social segments.
As of end-March 2021, PKPP’s total planted hectarage expanded to about 55,000ha following its successful acquisition of about 16,500ha of oil palm estates in November 2020.
Its social plantations remain at around 5,127ha (9%) of total oil palm planted area.
PKPP has a large portion of ageing trees, which not only affects yields of fresh fruit bunch and crude palm oil, but also elevates its unit costs.