RAM Ratings reaffirms New Pantai Expressway's issue rating

Published on 23 September 2015

RAM Ratings has reaffirmed the BBB2/Stable rating of New Pantai Expressway Sdn Bhd’s (NPESB or the Company) RM250 million Junior Bai’ Bithaman Ajil Notes (2003/2016) (Junior Notes). The rating considers the lumpy principal repayments on the Junior Notes, and NPESB’s finance service coverage ratios (FSCRs) (with cash balances, post-distribution) which are expected to range between 1.44 times and 1.85 times (based on RAM’s projections) up to October 2016.
Driven by its strategic alignment, growth of traffic on the Expressway’s (or the NPE) remained healthy in FY Mar 2015, with average daily traffic (ADT) of 196,077 vehicles (+7.5% y-o-y). Given the NPE’s mature traffic profile, under RAM's stressed scenario, we expect annual traffic volume growth to moderate to 4.4% for 2016, assuming no toll-rate hike for the remaining tenure of the Junior Notes. Should the toll rates increase in 2016 as per rates in the Concession Agreement, the traffic volume is anticipated to decline 6% the same year.
Based on RAM's estimates, NPESB is envisaged to register an average annual pre-financing cashflow of RM109 million (without a rate hike) or RM139 million (with a rate hike in 2016) for the remaining tenure of the Junior Notes. Coupled with ample cash holdings in excess of RM80 million as at end-April 2015, this is expected to sufficiently cover a lumpy principal repayment of RM120 million and a RLC repayment of about RM27 million in 2016. Furthermore, we expect NPESB to curtail distributions or repayments to shareholders prior to the maturity of the Junior Notes.
As in most concession-related projects, the Company is exposed to regulatory and single-project risks. The Government has not revised toll rates for the Expressway since 2009, and in February 2011, reduced the rate for Class 1 vehicles at the PJS 2 toll plaza from RM1.60 to RM1.00, effective for a 5-year period. Nevertheless, the Company has, to date, received timely cash compensation from the Government over the last 6 years.
NPESB holds the concession for the construction, operations and maintenance of the 19.6-km intra-urban NPE.
Media contact
Wang Wai Wah
(603) 7628 1110
waiwah@ram.com.my