MARC Ratings has affirmed its AA-_IS rating on SHC Capital Sdn Bhd’s RM80 million issuance under its RM200 million Islamic Medium-Term Notes (Sukuk Wakalah) Programme with a stable outlook.

SHC Capital is a wholly-owned funding vehicle of Tunas Cool Energy Sdn Bhd (TUNAS), which is a subsidiary of Sin Heng Chan (Malaya) Berhad. TUNAS owns a district cooling system (DCS) plant and supplies chilled water for air conditioning to four higher learning institutions within the Pagoh Education Hub (PEH) in Johor.

The rating reflects TUNAS’ stable cash flow, underpinned by its 20-year take-or-pay contract with Sime Darby Property Selatan Satu Sdn Bhd, where the ultimate obligor is the government via the Ministry of Education. The contract guarantees minimum annual revenue of approximately RM15.02 million through 2037 and includes an energy cost pass-through mechanism. This structure provides strong cash flow visibility, eliminates demand risk, and supports annual operating cash flow in the range of RM7 million to RM9 million — sufficient to cover debt service obligations under the rated programme.

The rating is moderated by potential administrative delays in receivables collection; however, the company has historically received payments within 45 days of its credit terms. Contract termination risk exists, but is low, given TUNAS’ strong track record of over eight years delivering essential cooling services to PEH. The underground pipe network connecting the DCS plant to buildings within PEH also presents a significant barrier to entry for potential competitors.

The average projected finance service cover ratio (FSCR) through 2037 is 2.3x, with a minimum of 1.9x under the sensitised scenario (assuming a 90-day collection cycle and stressed operating expenses). Cash flow in absolute terms remains modest, offering limited headroom for cost overruns or unexpected dividend upstreams. However, distributions are subject to a post-distribution FSCR threshold of 2.0x, providing some protection to debt service capacity.