MARC has affirmed its rating of AAA(fg) on
Segi Astana Sdn Bhd's (Segi Astana) RM470.0 million Medium-Term Notes (MTN)
programme with a stable outlook. The affirmed rating and outlook are
based on the unconditional and irrevocable financial guarantee insurance
provided by Danajamin Nasional Berhad (Danajamin) on which MARC has an insurer
financial strength rating of AAA/stable and long-term counterparty credit
rating of AAA/stable.
Segi
Astana operates gateaway@klia2 under a 25-year
build-operate-transfer concession, expiring in 2036. The company has an option to extend the
concession for another 10 years. gateway@klia2 is an
integrated complex comprising a retail mall with 355,977 sq
ft of net lettable area (NLA), 5,690 parking lots in the car park building and
a transportation hub at Kuala Lumpur
International Airport 2 (klia2)
in Sepang, Selangor. By 2H2017, Segi Astana expects to increase the mall’s NLA
by 7.4% to 382,415 sq ft with the conversion of space from
common areas.
While the occupancy rate at gateaway@klia2
increased to 75.4% as at end-2016 (end-2015:
71.5%), the level remains below management’s target of 85.0%. The mall continues to face competition from the adjoining airside mall in
klia2 and from the nearby retail
mall, Mitsui Outlet Park KLIA Sepang. MARC notes the recent measure
to standardise passenger service
charges (PSC) in all Malaysian airports for domestic and ASEAN destinations
may also affect footfall at gateway@klia2 if some
airlines opt to use KLIA
instead.
The rentals
from the mall as well as income from both the carpark and transportation hub
formed 97.1% of total revenue in 2016. Segi Astana recorded total revenue of
RM121.1 million for unaudited 2016, comparable to the RM120.3 million achieved
in 2015. Revenue was supported by an 8.0% year-on-year (y-o-y) rise in income
from the carpark and transportation hub which was offset by a decrease of 4.7%
y-o-y in rental income as a result of a lower average gross rental rate of
RM21.56 psf (2015: RM22.54 psf). Pre-tax profit increased sharply to RM27.2
million in 2016 (2015:RM12.7 million), largely due to an extension of the
amortisation period on the capitalised cost of the integrated complex from 25
years to 35 years. Excluding the
decrease in amortisation expense, pre-tax profit would increase
by 25.2% y-o-y to RM15.9 million.
Segi Astana’s cash
flow generation is sensitive to occupancy levels and rental rates given its
operating and financial leverage. Under MARC’s analysis, if the occupancy rate
at the mall remains at 75.0% throughout the tenure of the programme, the rental
rate would need to increase by more than 1.5% every
three years to meet a minimum debt service coverage ratio of 1.25 times. If the
average rental remains at the prospective rate of RM19.65 psf (after the new
tenancies which will occupy the additional NLA become effective), over the
remaining term of the rated issue, Segi Astana would need to achieve a minimum
occupancy rate of 78.9%. In this respect, Segi Astana expects the occupancy
rate at the mall to achieve 79.7% by 2H2017 when the new tenancies become
effective.
Segi
Astana’s debt-to-equity (DE) ratio has improved since the commencement of
operations in 2014. As at end-2016, the DE ratio stood at 3.42 times after the
repayment of the first tranche of RM30.0 million under the rated programme on
December 30, 2016. Although the company has limited financial flexibility, cash
flow generation has improved with cash reserves net of tenant deposits of
RM64.9 million as at end-2016 compared to RM38.2 million as at end-2015. For
2017, repayments due under the rated programme consist of two tranches of
RM20.0 million each payable in June and August 2017.
Noteholders are insulated
from any downside risks related to the credit profile of Segi Astana by the
irrevocable and unconditional guarantee provided by Danajamin. Any changes in
the supported rating or rating outlook will be primarily driven by changes in
Danajamin’s credit strength.
Contacts: Wan Abdul Muiz, +603-2082 2260/ muiz@marc.com.my;
Yap Lai Ken, +603-2082 2247/ laiken@marc.com.my.
March
28, 2017
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