Published on 07 October 2015
RAM Ratings has reaffirmed the AA2/Stable
rating of Kesas Sdn Bhd’s (the Company) RM735 million Sukuk Musharakah
IMTN (2014/2023). The reaffirmation of the rating continues to reflect
the Shah Alam Expressway’s (SAE or the Expressway) robust traffic
profile as well as the strong debt-servicing aptitude of Kesas – the
toll concessionaire for the 35-km SAE linking the Kuala Lumpur-Seremban
Highway in the east and Pandamaran in the west.
The SAE maintained healthy traffic-volume growth in
FY Jul 2015, registering average daily traffic (ADT) of 329,844 vehicles
(+6.2% annualised), attributable to the continued organic increase of
traffic on the Expressway. Based on RAM’s estimates, the SAE’s ADT
growth is envisaged to average 2.1% during years when there are no rate
increases and decline 4.5% when rates are increased. Further, the
Expressway is projected to observe a 2% decrease in addition to the
traffic-volume growth/decline rate upon commencement of operations of
the extended Ampang LRT line (anticipated in 2017), part of which will
run parallel to the former.
Based on our stressed scenarios, Kesas is projected
to generate an average annual pre-financing cashflow of up to RM216.17
million, translating into strong minimum FSCRs (with cash balances,
post-distribution) of 2.25 times for the remaining tenure of the Sukuk,
in line with an AA2-rated transaction. Meanwhile, Kesas is expected to
optimise dividends while adhering to its covenants throughout the
Sukuk’s tenure.
As with other toll-road projects, the Company is
inherently exposed to regulatory and single-project risks. Despite an
expected toll-rate hike in 2016 in accordance with the concession
agreement, we do not discount the possibility of the tariff revision
being deferred or restructured. Should Kesas not be fully compensated
with cash under either scenario, our stress analysis indicates that the
Company would have to curtail its dividend payout to maintain its
debt-servicing ability.
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