YTL Corp’s balance sheet constrained by hefty debt load

KUALA LUMPUR: YTL Corp Bhd's balance sheet remains constrained by its hefty debt load, says RAM Ratings Bhd.

The ratings agency said on Thursday, March 11 that for the purpose of company-level analysis, it included some RM2.18 billion of corporate guarantees, which YTL Corp had extended to its acquisitions in Singapore.

RAM Ratings said looking ahead, YTL Corp’s operating cashflow debt coverage ratio was expected to range around 0.19 times to 0.26 times from 2010 to 2014. The group may also stay on an acquisitive path to further expand and diversify its earnings base.

"Nevertheless, we remain cautious about the added strain on its balance sheet as future investments would likely be at least partially debt-funded. In this regard, such acquisitions that are not adequately supported by dividend receipts are likely to exert pressure on YTL Corp’s credit profile," it said.

The ratings agency had reaffirmed the respective long- and short-term ratings of AA1 and P1 for YTL Corp's RM500 million medium-term notes programme (2004/2019) and RM500 million commercial papers programme (2005/2012); the long-term rating has a stable outlook.

YTL Corp is involved in power generation and transmission, water and sewerage, cement manufacturing and trading, property investment and development, construction, hotels, telecommunications and information technology.

RAM Ratings said the ratings reflect YTL Corp’s favourable business profile as a conglomerate with a diversified earnings profile. Furthermore, the group’s earnings are backed by its strong subsidiaries in various industries that are viewed to be self-sustaining and require minimal financial support from YTL Corp.

"While the group is exposed to cyclical industries via its cement-manufacturing, property-development and construction divisions, this is largely mitigated by the steady and predictable concession-driven cashflow from its utilities division," it said.

It added the group had maintained its adequate liquidity position, underpinned by its ample cash hoard vis-à-vis its short-term liabilities and further enhanced by its ability to tap its subsidiaries for dividend income.

In addition, YTL Corp derives substantial financial flexibility from its portfolio of listed investments as well as its firm reputation and excellent operating track record.