RAM Ratings again reaffirms Gulf Inv Corp's AAA/Stable/P1 ratings

01/12/2014 00:21 AST

RAM Ratings has reaffirmed Gulf Investment Corporation GSC’s (GIC or the Corporation) AAA/Stable/P1 financial institution ratings. Concurrently, the AAA/Stable ratings of GIC’s MYR 3.5 billion Sukuk Wakalah bi Istithmar Programme (2011/2031) and MYR 400 million Senior Unsecured Bonds (2008/2023) have been reaffirmed.

As an institution mandated to support the development of private enterprises and economic growth within the Gulf Cooperation Council (GCC), the rating reaffirmation reflects the continued strong support GIC receives from its six GCC shareholders – Kuwait, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Oman. The reaffirmation also considers the Corporation’s better liquidity profile and lower leverage levels. These improvements, however, remain balanced by impairment and concentration risks, which may add to the volatility of GIC’s earnings.

The Corporation’s pre-tax profit was lifted 26 per cent to $165 million in FY Dec 2013, as sizeable gains from its investment securities and higher contributions from its investee companies offset the impact from heftier impairment charges. While GIC’s earnings are still primarily driven by the performance of its principal investments, trading and investment gains from its investment securities also feature strongly in the Corporation’s income profile. In 1H FY Dec 2014, GIC booked a pre-tax profit of $164 million. As the Corporation focuses on realising the value of its principal investments, it is expected to record some divestment gains in the future.

GIC’s funding and liquidity profile has improved, supported by its reduced reliance on repos and a well-spread debt-maturity profile. As at end-June 2014, the Corporation’s liquid assets provided a 2.4 times’ cover on its short-term obligations (end-December 2013: 1.9 times). GIC’s efforts to deleverage its balance sheet and scale down its risk exposures had eased its leverage ratio to 1.9 times as at end-June 2014 (end-December 2013: 2.2 times). At the same time, its total capital ratio stood at a robust 43.6 per cent.

CPI Financial