MARC Ratings has upgraded its rating on SHC Capital Sdn Bhd’s RM80 million issuance under the company’s RM200 million Islamic Medium-Term Notes (Sukuk Wakalah) Programme to AAIS from AA-IS, with a stable outlook. The outstanding sukuk balance is RM60 million.
SHC Capital is a wholly-owned funding vehicle of Tunas Cool Energy Sdn Bhd (TUNAS), a subsidiary of Sin Heng Chan (Malaya) Berhad. TUNAS owns and operates a district cooling system plant supplying chilled water to four higher learning institutions within the Pagoh Education Hub, Johor.
The rating upgrade reflects SHC Capital’s strengthened credit profile, underpinned by cash flow generation and debt-servicing capacity that have consistently outperformed the initial rating case. Although average cooling energy consumption between 2021 and 2025 was lower than initially projected, contractual revenue remained protected under the take-or-pay structure while lower utilisation resulted in reduced variable operating costs. Together with the August 2025 tariff revision, this supported stronger-than-anticipated revenue, cash flow generation and coverage metrics. Consequently, the average and minimum finance service cover ratios (FSCRs) of 2.71x and 2.35x, exceeded the projected 1.96x and 1.73x. Despite moderating to 1.86x in 2025 following a dividend distribution, the FSCR remained comfortably above the 1.25x covenant.
The revised rating case incorporates the August 2025 tariff adjustment while retaining conservative assumptions, including a 90-day receivables collection period, compared with the historical collection period of less than 45 days, and an 80% dispatch factor. Reflecting the project’s stronger liquidity position, the projected average and minimum FSCRs improved to 2.29x and 2.14x, from 2.10x and 1.90x under the initial rating case. The projections may also prove conservative if actual cooling energy consumption remains below the assumed dispatch factor, as lower variable operating costs would support cash flow while contractual minimum revenue remains protected under the take-or-pay arrangement throughout the remaining sukuk tenure.