KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed its AAA rating on UMW Holdings Berhad's (UMW) sukuk of up to RM2.0 billion and its AA-IS rating on the RM2.0 billion Perpetual Sukuk Programme.
The outlook for all ratings is stable, it said in a statement.
The rating agency said UMW's long standing leading position in the domestic automotive market, significant automotive sales in recent years that have translated into strong earnings, and healthy consolidated balance sheet are key rating drivers for the affirmation.
It said these strengths are moderated by the keen price competition in the domestic automotive industry and the potential impact on financial performance from business divestments and other structural changes to better align with parent Sime Darby Bhd.
"This is following the completion of an acquisition exercise in March 2024," it said.
While both Sime Darby and UMW mainly operate in the automotive as well as heavy and industrial equipment segments, MARC Rating said the latter's primary businesses have remained independent and intact as of date, save for the disposal of its 74 per cent stake in UMW Komatsu Heavy Equipment Sdn Bhd.
It said this disposal, expected to be completed by the third quarter (Q3) of 2024, was necessitated to prevent competition between two principles involved in the distribution of heavy equipment within the Sime Darby group.
The rating agency views the financial impact on UMW Group's performance as minimal, as this segment accounted for about 6 per cent or RM80 million, of its profit before tax as of December 2023.
"MARC Ratings understands that no further significant divestment is envisaged over the near term, with a focus to remain on group-wide cost optimisation following the acquisition," it added.