KUALA LUMPUR (Jan 28): RAM Ratings has upgraded its long-term ratings for the debt paper programmes of YTL Corp Bhd (KL:YTL) and its 52.5%-controlled unit YTL Power International Bhd (KL:YTLPOWR) to AAA, after both showcased sustained improvements in fundamentals.

Outlook on both groups’ facilities was also revised to stable from positive, the credit rating agency said in statements on Wednesday. Short-term ratings remain at P1.

The revisions reflect the improved performance of YTL Corp and YTL Power’s core investments, as well as improved earnings.

YTL Corp’s return on capital employed strengthened to 8-10% over the past two years, versus around 5% previously, while YTL Power’s rose to 9% over the past three years compared to 3.6% in FY2021, RAM Ratings noted.

Meanwhile, YTL Corp’s growth has been driven by a turnaround at key subsidiaries, including YTL Power and YTL Cement, as well as better performance in the hotels and property segments, the rating agency added.

YTL Power’s earnings growth was propelled by a strong turnaround in profitability from core power generation and water subsidiaries, RAM Ratings said.

Cashflow coverage at both groups is also expected to remain above the AAA-rating threshold, the rating agency said, despite an expected rise in debt to fund digital infrastructure expansion.

YTL Corp’s (including YTL Power) combined operating cashflows-to-net debt coverage stood at 1.48 times for FY2025, it noted.

“Annual dividend flows at both YTL Power and YTL Corp (around RM1.2 billion-RM2 billion per annum) are anticipated to keep its operating cashflows-to-net-debt coverage ratio above the 0.30 times threshold for a AAA-rating," RAM Ratings said.

Both groups’ respective bonus issue of warrants in early 2025 also expands their equity bases and diversifies funding of future investments, the agency also noted, reducing reliance on debt.