RAM Ratings reaffirms Projek Lintasan Shah Alam’s debt ratings

Published on 05 December 2012

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; the Highway commenced tolling operations on 17 July 2010.

The LKSA enjoys traffic flow from a ready catchment area within the established confines of Shah Alam, which is expected to make up the bulk of the Highway’s traffic volume in the first 5 years of its operations. Longer-term traffic potential for the LKSA is expected to be supported by the 1,235-acre Alam Impian township and, to a smaller extent, the 192-acre TTDI mixed-development project. Like other toll-road projects, however, the ratings remain moderated by regulatory and single-project risks.

In 2011, the Highway registered a healthy average daily traffic of 46,068 vehicles. The traffic ramp-up at the Seri Muda toll plaza is supported by the existing travel patterns within the catchment area while the encouraging numbers of the Alam Impian toll plaza is mainly driven by diverted traffic from a congested road in the vicinity. Nonetheless, the occupancy rates of the Alam Impian township, which should be the chief impetus for traffic flow at the Alam Impian toll plaza, came in below our expectations due to slower-than-expected launches.

Looking ahead, PLSA’s debt-servicing ability is projected to remain adequate over the medium term, underpinned by RM65.79 million of accumulated cash as at end-October 2012 and a projected annual pre-financing cashflow of at least RM6 million against RM11.55 million of annual debt obligations up to fiscal 2018. Such a light debt load had been deliberately structured to allow for a substantial ramp-up period, to better match future toll revenue to debt obligations. For PLSA to maintain its debt-servicing ability past 2018 – when its debt obligations will rise – it is imperative that traffic be significantly ramped up alongside accelerated and increased occupation within the Alam Impian township. If this does not materialise, PLSA will likely face a liquidity strain beyond 2018, thereby warranting a reassessment of the ratings of both the Senior and Junior Sukuk.

Media contact

Jocelyn Chiang

(603) 7628 1124

jocelyn@ram.com.my