RAM Ratings reaffirms ratings of Sabah Ports’ debt issues

RAM Ratings reaffirms ratings of Sabah Ports’ debt issues

Published on 31 October 2012

RAM Ratings has reaffirmed the respective AA3 and AA3/P1 ratings of Sabah Ports Sdn Bhd’s (“Sabah Ports” or “the Company”) RM80 million Bai’ Bithaman Ajil Debt Securities (2007/2017) (“BaIDS”) and RM70 Million Murabahah Underwritten Notes Issuance Facility/Islamic Medium-Term Notes Facility (2007/2014) (“MUNIF/IMTN”); the long-term ratings carry a stable outlook.

The reaffirmation of the ratings reflects Sabah Ports’ strategic importance and near-monopoly status in Sabah, among other factors. The Company not only handles the imports of essential goods and exports of Sabah’s commodities, but also plays a key role in the logistic chain of essential goods within the State in light of its mountainous terrain which poses a challenge to the development of roads and railways. The Company’s network of 8 ports along Sabah’s coastline effectively caters to the State’s main population and economic centres. Sabah Ports’ management continues to work closely with the State Government in a bid to preserve the Company’s dominant market position in Sabah.

While we note that port operations are sensitive to economic cycles, we have a positive view of Sabah Ports’ cargo profile which consists mainly of essential goods imported from Peninsular Malaysia via container, and bulk oil imports, both segments demonstrating an uptrend over the past 3 years. Elsewhere, the Company’s future capital commitments are expected to be largely covered by internal funds. Although Sabah Ports has not been able to revise its tariffs since 2009, we expect the Company’s debt-servicing ability to remain intact, supported by its ready streams of cashflow. Sabah Ports’ debt level stood at RM340.47 million as at end-December 2011, which translated into an adjusted gearing ratio of around 1 time and a lease-adjusted funds from operations debt coverage (“FFODC”) ratio of 0.23 times. Looking forward, we expect the Company to maintain a sound balance sheet and steady debt-coverage measures over the next 5 years, with a projected average gearing ratio of 0.79 times and an FFODC ratio of 0.22 times.

Media contact

Chinthamani Thanneermalai

(603) 7628 1013

chinthamani@ram.com.my