profile search
latest updates
Press Release
26 Jul | Thursday
RAM Ratings reaffirms Chellam Plantations’ AAA(fg) sukuk rating
RAM Ratings has reaffirmed the AAA(fg)/Stable rating of the RM150 million 10-year tranche (2016/2026) under Chellam Plantations (Sabah) Sdn Bhd’s (the Group) RM300 million Guaranteed Sukuk Murabahah Programme (2016/2033). The enhanced rating is premised on an irrevocable and unconditional guarantee extended by Danajamin Nasional Berhad (rated AAA/Stable/P1) on the tranche.
 
Independent of the financial guarantee, Chellam Plantations’ stand-alone credit profile is constrained by its position as a relatively small planter and its still-weak financial profile. Its fresh fruit bunch (FFB) production of 152,423 MT in 2017 is low relative to its milling capacity of about 870,000 metric tonne (MT) per annum. The much larger milling capacity was a deliberate strategy to pursue incremental profits from processing external FFB despite the thin margins. As only 24% of processed FFB was sourced internally during the year, its dependence on third-party FFB exposes the Group to competition for FFB within its mills’ vicinityand kept its cost per metric tonne (MT) of CPO elevated. Nevertheless, the Group’s oil extraction rate, which stood at 22% in FY Dec 2017, has remained noteworthy and comparable to those of larger regional players.
 

As with its industry peers, Chellam Plantations’ productivity has been recovering from the severe after-effects of the El Nino phenomenon in 2015. The Group’s FFB production is envisaged to normalise this year, with the best recovery anticipated from its East Kalimantan estates. Overall FFB output surged 29% y-o-y in FY Dec 2017, resulting in improved overall FFB and CPO yields of 11.6 and 2.6 MT/mature ha, respectively (FY Dec 2016: 10.0 and 2.3 MT/mature ha). Over the medium term, the maturing of its young palms (56% of total planted area) to a higher-yielding productive age will support the robust growth of Chellam Plantations’ FFB output.
 
In FY Dec 2017, higher average CPO selling prices and healthier FFB output strengthened the Group’s funds from operations (FFO) debt cover to 0.08 times (FY Dec 2016: 0.05 times), albeit still weak. By the end of the year, Chellam Plantations’ gearing ratio had inched up to 0.65 times (end-December 2016: 0.60 times) despite a lower debt level. This was due to the translation losses of its Indonesian assets amid the rupiah’s depreciation against the ringgit. Going forward, the Group’s gearing ratio is expected to increase to about 0.67 times by end-December 2018, although still adequate, after a RM5.6 million drawdown on its unrated bonds in the second half of this year, before tapering off as it pares down its debts from fiscal 2019 onwards. As its young palms mature and its dependence on external FFB slowly decreases, the Group’s FFO debt cover is envisaged to rise above 0.10 times in FY Dec 2018, barring any unexpected capex or acquisition.
 
Chellam Plantations is an investment-holding company with subsidiaries involved in the cultivation of oil palms and the milling of palm oil. Ultimately wholly owned by Datuk Venkata Chellam and his family, the Group’s land bank spans 16,922 ha across Sabah and East Kalimantan, of which 13,462 ha have been planted. It also has three mills, with a total milling capacity of 871,200 MT per annum as at end-December 2017. Over the next two years, Chellam Plantations will be expanding its mill in Sabah.


Analytical contact
Thong Mun Wai
(603) 7628 1022
munwai@ram.com.my
 
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
 
Date of release: 26 July 2018
 
 
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
 
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
 
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
 
Published by RAM Rating Services Berhad
Ó Copyright 2018 by RAM Rating Services Berhad
 

Analytical contact
Irfan Afifah Mohd Zaki
(603) 7628 1196
irfan@ram.com.my
 
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
 
Date of release: 17 July 2018
 
 
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
 
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
 
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
 
Published by RAM Rating Services Berhad
 Copyright 2018 by RAM Rating Services Berhad
Analytical contact
Irfan Afifah Mohd Zaki
(603) 7628 1196
irfan@ram.com.my
 
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
 
Date of release: 17 July 2018
 
 
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
 
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
 
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
 
Published by RAM Rating Services Berhad
 Copyright 2018 by RAM Rating Services Berhad
source: RAM Ratings
Print Mail Twitter LinkedIn Facebook Google+
Past Articles
2018
October
September
August
July
June
May
April
March
February
January
2017
December
November
October
September
August
July
June
May
April
March
February
January
2016
December
November
September
July
June
May
April
March
2015
June
May
April
March
February
January
2014
December
November
October
September
August
July
June
May
April
March
February
January
2013
December
October
July
May
April
March
2012
December