Credit Update: Toll Road Bond_15 Oct 2015

Credit update: Mildly positive on toll rate hikes

·         Highways that we reviewed in Aug will mostly see an increase in toll rates ranging 17%-100% on 15 Oct, except for PLUS, Kesas, Grand Sepadu and MRCB Southern Link.

·         We view the toll rate hikes as credit positive because it removes some of the concerns on concessionaires’ cash flow stability and liquidity risk. The negative affect on traffic volume is likely to be short term.

·         But the traffic downside will increase the risk of traffic underperformance for some highways with alternatives or less mature catchment traffic.