RAM Ratings reaffirms A1 rating of Lumut Maritime Terminal's BaIDS, with stable outlook

Published on 09 September 2011
RAM Ratings has reaffirmed the A1 rating of Lumut Maritime Terminal Sdn Bhd’s (LMT or the Company) RM60 million Bai Bithaman Ajil Islamic Debt Securities (2004/2017) (BaIDS), with a stable outlook. LMT owns and operates a multi-purpose port facility (LMT Terminal) while providing operation and maintenance (O&M) services to Lekir Bulk Terminal Sdn Bhd’s (LBT) deep-water bulk jetty, which at present primarily caters to the coal-unloading requirements of TNB Janamanjung Sdn Bhd (TNBJ). LMT is also involved in the development and sale of an 885-acre industrial park known as Lumut Port Industrial Park, located next to the port.

LMT’s credit strength remains anchored by the O&M agreement with LBT, as well as its laudable operating track record. The O&M segment yields stable and predictable cashflow; LMT receives fixed payments regardless of the volume of coal handled at the jetty. Notably, cashflow from O&M services alone is expected to cover the Company’s yearly debt-servicing obligations on the BaIDS. As at end-June 2011, the amount of outstanding BaIDS came up to RM45 million relative to LMT’s RM73 million of cash reserves and an expected average annual funds from operations of around RM31 million.

Meanwhile, the Company has exclusive rights to LMT Terminal and within a 30-km radius from the port for 20 years until July 2015, under a Concession Agreement with the State Government of Perak (Perak Government). We understand that LMT is currently negotiating with the Perak Government for an extension on the concession. Given the LMT Terminal’s importance to Perak’s economy, there is a high likelihood that an extension will be granted.

On the other hand, the rating remains moderated by LMT’s position as a small port catering to a niche market of industrial customers within Lumut Port Industrial Park and the primary hinterland of central Perak. In 2010, LMT’s cargo throughput summed up to 3.30 million MT (2009: 3.26 million MT). We understand that given the existing port facilities, cargo mix and operational methodology, the Terminal’s maximum capacity is just over 4 million MT of throughput per year. Furthermore, its location inside the mouth of Sungai Dinding somewhat restricts any form of major expansion. Nonetheless, we note that LMT Terminal has a favourable cargo profile, which has proven more resilient against economic downturns due to its chiefly commodities-based consignments.

Media contact
Michael Ti
(603) 7628 1015
michael@ram.com.my