The rating reaffirmation of MTD Prime Sdn Bhd’s (MTD Prime) Al-Bai Bithaman Ajil Facility (BBA) reflects the positive traffic growth at the KL – Karak Highway, higher than the Government’s guaranteed traffic volume; and the strength of the company’s financial profile underpinned by the strong revenue growth.

MTD Prime is the concession holder of the KL – Karak Highway. In July 2002, the Government announced a revision to the toll rates at both the Gombak and Bentong toll plazas. The new toll rates were, however, lower than the rates agreed upon under the Supplemental Concession Agreement. To compensate MTD Prime for the expected loss of earnings for the remainder of the concession period, the Government proposed an extension of the concession period for a further six years, up to 2032; waiver of the Government Support Loan amounting to RM183.2 million; awarding the right of toll collection and maintenance of the East Coast Expressway (ECE) Phase 1 for 28 years from the year 2005; and payment of cash compensation totalling RM97.1 million.

The highway registered a 7% traffic growth in 2002 to 25.0 million passenger car units (pcus). This was higher than the Government’s support traffic volume of 20.1 million pcu and the company’s projected traffic growth rate of 6% per annum. For the remainder of the Facility period, the company projects a traffic growth of 6% per annum.

Reflecting the higher traffic volume, MTD Prime’s revenue continued on an upward trend, reaching RM104.7 million as at end-March 2003. Operating profit margin was in line with the previous four-year average of 69.9%. The expected completion of the ECE Phase 1 in the third quarter of 2004 will further boost the company’s revenue base, going forward. MTD Prime’s cash flow protection measures also improved during the period under review backed by the strong internal cash generation capacity.

The company’s debt leverage improved to 1.65x in FYE 3/03 (FYE3/02: 2.02x). The pro-forma debt-to-equity ratio is expected to increase up to 2.29x upon the company incurring new debt to partly finance its proposed RM250 million advance to its holding company, MTD Infraperdana. The pro-forma ratio would reduce to 1.45x should the government support loan of RM183.2 million be waived as per the compensation package. Given the semi-annual redemption of the BBA primary notes over the facility period, the company’s debt leverage will trend downwards towards the maturity of the facility.