RAM Ratings reaffirms AA2/P1 ratings of Litrak's Islamic securities

Published on 30 September 2011
RAM Ratings has reaffirmed the AA2 ratings of Lingkaran Trans Kota Sdn Bhd’s (“Litrak” or “the Company”) Sukuk Musharakah Islamic Medium-Term Notes I Programme (“IMTN I”) of up to RM1.15 billion (2008/2023) and Sukuk Musharakah Islamic Medium-Term Notes II Programme (“IMTN II”) of up to RM300 million (2008/2023); both the long-term ratings have a stable outlook. At the same time, RAM Ratings has also reaffirmed the P1 rating of Litrak’s Islamic Commercial Papers Programme (“ICP”) of up to RM100 million. The IMTN I, IMTN II and ICP will collectively be referred to as “the Islamic Securities”.

Litrak, a single-purpose company, is the toll concessionaire for the 40-km intra-urban Lebuhraya Damansara-Puchong (“LDP”). The Company’s strong business profile is predominantly backed by the LDP’s strategic alignment, which straddles the densely populated areas of Puchong, Sunway, Petaling Jaya, Damansara and Kepong. In FYE 31 March 2011 (“FY Mar 2011”), the Highway’s average daily traffic (“ADT”) increased 1.78% year-on-year (“y-o-y”) to 445,710 vehicles (FY Mar 2010: 437,921 vehicles). Meanwhile, Litrak’s healthy return on capital employed of around 14% for the last 5 financial years highlights its strong business profile.

Based on RAM Ratings’ sensitised cashflow, Litrak’s average pre-financing cashflow is projected to come up to around RM200 million per annum, translating into minimum and average finance service coverage ratios (with cash balances, post-distribution) - calculated at financial year-end - of a respective 2.75 times and 3.48 times. In addition, Litrak’s sensitised minimum and average FSCRs (with cash balances, post-distribution) on principal payment dates are projected to come up to 2 times and 2.94 times, respectively. In assessing Litrak’s annual distributions, RAM Ratings’ sensitised cashflow projections assume that the Company will adhere to its financial covenants throughout the tenures of the Islamic Securities (i.e. on a forward-looking basis, as opposed to only the year of assessment).

In the meantime, the rating remains moderated by regulatory risk that is inherent for all toll-road projects, as well as single-project risk. On this note, the Government has allocated some RM2.8 billion to extend the existing Light Rail Transport (“LRT”) lines under the 10th Malaysia Plan. In addition, 2 new highways that run parallel to some stretches of the LDP have been proposed, i.e. the Kinrara-Damansara Highway and the Kinrara-Serdang-Putrajaya Highway. While we note that the proposed LRT line extensions and new highways are likely to affect the LDP’s traffic demand over the longer term, the extent of the impact is more difficult to predict at this juncture, as commuters’ preference for modes of transportation and highways will depend on factors such as fuel prices, travel time, destination, convenience and cost.

Media contact
Yean Ni Ven
(603) 7628 1172
niven@ram.com.my