Published on 10 January 2013
RAM Ratings has reaffirmed the respective long- and short-term ratings of AAA and P1 for Malaysia Airports Capital Berhad’s (“MACB”) RM3.10 billion Islamic Medium-Term Notes Programme (2010/2025) and RM1.00 billion Islamic Commercial Papers Programme (2010/2017); both facilities have a combined limit of RM3.10 billion in nominal value and are collectively referred to as “the Sukuk”. The long-term rating has a stable outlook.
MACB is a special-purpose vehicle set up as a wholly-owned subsidiary of Malaysia Airports Holdings Berhad (“MAHB” or “the Group”) to undertake the issuance of the Sukuk for the latter. The ratings reflect MAHB’s solid business profile, which is anchored by its position as the sole operator of all 39 government-owned airports in Malaysia. Passenger traffic at airports under the Group had steadily trended upwards between 2007 and 2011, with an average growth of 8.6%. For the first 9 months of FYE December 2012 (“9M FY Dec 2012”), passenger traffic increased 3.8% year-on-year to about 49 million, spurred by strong growth in the low-cost carrier segment. Elsewhere, MAHB enjoys a strong collaborative relationship with the Government of Malaysia (“GoM”), given the Group’s critical role as the operator of strategic assets of the country.
MAHB’s adjusted gearing ratio and adjusted funds from operations (“FFO”) debt coverage stood at 0.62 times and 0.23 times, respectively, as at end-September 2012, within expectations. Looking ahead, we note that the Group will incur about RM1.5 billion of capital expenditure (“capex”) to complete the construction of the new LCCT (“klia2”). Of this amount, MAHB has drawn down RM0.6 billion from the current RM3.1 billion IMTN Programme. As for the remaining capex, the Group is exploring various funding options to ensure that its gearing ratio remains below 1 time. “MAHB also intends to expand its capital base including implementing a dividend reinvestment plan, among others. In line with this, we expect its adjusted FFO debt coverage to stay adequate at above 0.2 times in FY Dec 2012”, notes Kevin Lim, RAM Ratings’ Head of Consumer and Industrial Ratings.
“Although these metrics are somewhat weaker than that of its AAA-peers, we take comfort from the fact that MAHB generates fairly stable and strong cashflows. In addition, the Group’s FFO debt coverage is anticipated to improve to 0.3 times in 2 years as contributions from klia2 ramp up,” adds Lim.
The ratings have factored in several challenges faced by MAHB. The Group is exposed to construction risk due to the ongoing development of klia2; any additional cost or deviation from the scheduled completion date could affect the Group’s financial profile. klia2 was about 74% complete as at 13 December 2012, and is expected to be launched on 28 June 2013 as announced by the Malaysian Prime Minister recently. We note that most of the major infrastructure works have been completed. Barring unforeseen delays, we opine that the remaining work should be completed on time.
Meanwhile, MAHB’s operations are susceptible to event risk, given that air traffic is vulnerable to external events. The Group also competes with other international airports in the Asia-Pacific region. MAHB further faces regulatory and political risks as it operates in a regulated industry, with most of its key decisions subject to the approval of the GoM. Likewise, the Group’s ventures in India, Turkey and the Maldives are exposed to political and regulatory risks. This was evident in the Maldivian government’s recent termination of an agreement to have MAHB manage the Ibrahim Nasir International Airport in the country. For more information on this, please refer to RAM Ratings’ press release dated 19 December 2012.
Woon Tien Ern
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