MARC Ratings has affirmed the AAIS /AA ratings on funding vehicle OSK Rated Bond Sdn Bhd’s (OSKRB) Sukuk Murabahah/ Multi-Currency Medium-Term Notes (Sukuk/MCMTN) Programmes with a combined limit of up to RM3.5 billion. The ratings outlook is stable. The ratings apply only to ringgit-denominated sukuk/notes issued under the programmes. The programmes carry an unconditional and irrevocable guarantee from OSKRB’s parent, OSK Holdings Berhad (OSK).
OSK’s steady group financial profile, reflected in its sizeable equity base and diversified earnings, remains a key rating driver. Moderating the ratings are demand risks in the property development business, as well as potential credit risks arising from the continued expansion of its capital financing portfolio. For 1H2026, group revenue and pre-tax profit increased by 9.5% and 9.3% y-o-y to RM997.7 million and RM323.1 million, respectively, supported by stronger contributions from the property, financial services and hospitality segments as well as a higher share of profit from its 10.27% interest in RHB Bank. These gains were partly offset by weaker profitability in the industries segment, mainly due to higher operating costs at the Johor Bahru cable plants and elevated raw material prices.
OSK’s ongoing domestic property developments had a combined gross development value (GDV) of about RM3.4 billion and an average take-up rate of 51% as at end-June 2026. The moderation in take-up from 56% a year earlier largely reflects the addition of newer launches, while established developments continued to record satisfactory sales. Domestic unbilled sales of about RM876 million continue to provide earnings visibility over the near term. In Australia, sales at Melbourne Square have been encouraging, with the high-rise BLVD residential tower achieving an 81% take-up rate, while AURA, another residential tower launched more recently in April 2026, recorded 15% take-up. The group’s 2,407-acre landbank, with an estimated GDV of RM16.5 billion, provides further development opportunities over the longer term.
The industries segment sustained its revenue momentum, with revenue rising 9% y-o-y to RM348.8 million on higher cable sales volumes, underpinned by public utility projects, private-sector demand and data centre-related infrastructure. Profitability, however, weakened materially, with pre-tax profit declining to RM5.9 million from RM19.9 million and pre-tax margin narrowing to 1.7% (1H2025: 6.2%). The compression largely reflects elevated raw material prices and the refurbishment, testing and gradual ramp-up costs at the recently acquired Johor Bahru cable manufacturing plants, which continued to operate at low productivity during the period. The Acotec industrial building system operations recorded lower wall panel sales and deliveries alongside higher logistics costs. The hospitality segment continued to recover, supported by higher occupancy and average room rates across the group’s hotels. Performance was underpinned by domestic tourism and convention-related demand, as well as the full reopening of the refurbished Swiss-Grand Beach Resort Kuantan in August 2025.
The financial services segment continued to expand, with the capital financing portfolio growing to RM2.8 billion as at end-June 2026 from RM2.5 billion as at end-2025. Growth was driven by operations in Australia, as well as the commencement of financing activities in Singapore. The non-performing loans (NPL) ratio improved to 2.2% while collateral coverage increased to 3.35x, providing some mitigation against credit risk from the enlarged portfolio. Consolidated borrowings increased to RM4.6 billion as at end-June 2026, with debt-to-equity (DE) ratio standing at 0.65x; excluding funding raised for the capital financing portfolio, adjusted DE remained largely unchanged at 0.35x (2025: 0.35x). Group cash flow from operations (CFO) remained negative at RM194.8 million, albeit improving from negative RM265.9 million in 1H2025 on lower net disbursements under the capital financing operations. Meanwhile, adjusted CFO interest coverage moderated to 1.01x (1H2025: 1.65x). Liquidity remains supported by cash balances of RM750.4 million, unutilised banking lines of RM1.4 billion and recurring dividend inflows from RHB Bank. MARC Ratings continues to view OSK’s stake in RHB Bank positively, given its sizeable contribution to group earnings and recurring dividend inflows, which provide additional financial flexibility.