RAM Ratings reaffirms Projek Lintasan Shah Alam's debt ratings

Published on 08 September 2011
RAM Ratings has reaffirmed the respective A1 and A3 ratings of Projek Lintasan Shah Alam Sdn Bhd’s (PLSA or the Company) RM330 million Sukuk Ijarah (Senior Sukuk) (2008/2027) and RM415 million Sukuk Mudharabah (Junior Sukuk) (2008/2037), with a stable outlook. PLSA is the concessionaire for the 14.7-km Lebuhraya Kemuning-Shah Alam (LKSA or the Highway) in Selangor.

For the first half of 2011, the Highway achieved an average daily traffic (ADT) of 43,957 vehicles, i.e. about 90% of RAM Ratings’ initial expectation. On this note, ADT at the Alam Impian toll plaza more than doubled our projections while that of the Seri Muda toll plaza was lower than anticipated due to the delayed upgrading works at a feeder road and the expansion of a competing road. Traffic mix, meanwhile, comprised more private vehicles and fewer commercial ones than envisaged. Over the next few years, traffic volume on the LKSA is expected to be supported by the ready catchment area that spans from the Shah Alam Expressway to the Federal Highway 2. Longer-term potential is anticipated to emanate from the progressive development of the Alam Impian township.

Based on RAM Ratings’ sensitised cashflow - which assumes a more gradual ramp-up in traffic volume and an unchanged traffic mix for the Highway from that observed during the initial year of tolling - PLSA is envisaged to register a finance service coverage ratio (FSCR) of at least 1.45 times on the principal repayment dates of the Senior Sukuk. Meanwhile, the minimum Sub-FSCR, which measures the Junior Sukuk’s repayment strength while the Senior Sukuk is still outstanding, is expected to come up to at least 1.19 times. Notably, the financing structure prohibits any outflow to the Junior Sukuk until 2025 while distributions to shareholders are not permitted as long as the Senior Sukuk remains outstanding, i.e. until 2027. These restrictions protect the Senior Sukuk holders’ interests and are crucial as the Company is expected to be relying on its cash holdings - from RM72.13 million of construction cost savings - to service its debt obligations over the next 4-5 years while traffic volume builds up for the LKSA.

Nonetheless, the Company may only have a very thin cash buffer by end-April 2027, after pre-funding the final tranche of the Senior Sukuk. As such, PLSA is expected to carefully manage its accumulated cash reserves in anticipation of the lumpy principal repayment. RAM Ratings will maintain a close watch on the Highway’s performance as it is crucial that LKSA achieves the expected ramp-up in traffic volume to preserve its debt-servicing ability.

Other rating considerations, which are inherent for all tolled roads, include regulatory and single-site risks.

Media contact
Jocelyn Chiang
(603) 7628 1124
jocelyn@ram.com.my