RAM Ratings has reaffirmed the AA3/stable/- rating of Sabah Ports Sdn Bhd’s (“Sabah Ports” or “the Company”) RM80 million Bai’ Bithaman Ajil Debt Securities (2007/2017) and the AA3/stable/P1 rating of its RM70 million Islamic Medium-Term Notes Facility/Murabahah Underwritten Notes Issuance Facility (2007/2014).

Published on 27 September 2013

RAM Ratings has reaffirmed the AA3/stable/- rating of Sabah Ports Sdn Bhd’s (“Sabah Ports” or “the Company”) RM80 million Bai’ Bithaman Ajil Debt Securities (2007/2017) and the AA3/stable/P1 rating of its RM70 million Islamic Medium-Term Notes Facility/Murabahah Underwritten Notes Issuance Facility (2007/2014). The ratings reflect the State Government’s participation in Sabah Ports given the Company’s importance in supporting the State’s economy and its strong financial position. These are, however, moderated by the high capital expenditure (“capex”)  required to constantly upgrade port infrastructure, its inability to revise tariffs since 2009 and sensitivity to economic cycles.
Based on RAM’s rating methodology on government-linked entities, Sabah Ports benefits from a moderate likelihood of extraordinary Government support. The State Government’s involvement is manifested through its 51.6%-stake in the Company via Suria Capital Holdings Berhad and its ownership of a Special Rights Share.  Sabah Ports plays a vital role as shipping is the most cost-effective method of transporting imports and exports, which constitute commodities such as crude palm oil (Sabah produces approximately one third of the country’s total) and crude petroleum. Cargo throughput handled by Sabah Ports has remained healthy over the past few years. This has in turn translated into strong earnings. In fiscal 2012, its operating profit before depreciation, interest and taxation margin was in excess of 55% against a revenue base of RM218 million. Cashflow generation and debt-servicing indicators have also remained steady.
While the Company recently announced that it will incur up to RM229 million in capex over the next 2 years, Sabah Ports has intimated a preference for funding future capex via internally-generated funds. In this regard, we note that Sabah Ports’ projected dividends are high and may need to be scaled back, or that it will alternatively necessitate additional debt funding, should the Company proceed with its expansion plans.
Media contact
Chinthamani Thanneermalai
(603) 7628 1013
chinthamani@ram.com.my