The upgrade on Kelang Multi Terminal Sdn Bhd’s (KMT) rating reflects the company’s strong business fundamentals driven by the steady growth in the container volume, solid financial profile and business growth opportunities from the Government’s full support in developing Port Klang into a Transshipment Megahub/Free Trade Zone. Moderating the strengths are the high, but manageable debt leverage level to finance the ongoing expansion plans and the stiff competition in the region.

KMT is the operator of Westport; one of the largest terminals in Malaysia with a 15-metre deep draft located in Port Klang catering to modern fifth generation vessels. With a capacity of 2.8 million twenty-foot equivalent units (TEUs) for container cargoes and 13.0 million tonnes per annum for conventional cargoes, its contribution to Port Klang has grown substantially over the years from a mere 26% of the total boxes handled in Port Klang in year 1998 to nearly 50% in year 2003.

KMT’s revenue continued on an upward trend in FY2003, driven mainly by the growth in container business despite the difficult economic environment due to stiffer competition from regional ports, political uncertainties in the Middle East and the SARS epidemic. In 2003, it handled a total container throughput of 2.3 million TEUs (FY2002: 2.0 million TEUs); around two thirds of which represented transshipment boxes.

Facilitating the growth in container volume is the port’s competitive tariffs, wide feeder coverage, seven container berths, large yard capacity, state-of-the-art terminal facilities, information technology support services and good infrastructure support. Westport’s
productivity measures are in line, and in some cases, better than fastport standards. Its strategic alliance with Hutchison Port Holdings, a major shareholder, benefited Westport in terms of technology transfer and access to other sister ports’ IT systems. Over the years, the port has also enjoyed support from the Main Line Operators, such as CMA, Goldstar, China Shipping Container Lines, Hanjin, Evergreen and Maersk Sealand, which account for the bulk of the port’s revenue.

Operating margin, though weighed down by the heavy depreciation charges on the equipment, remained high at over 30% for five consecutive years. In tandem with the strong operating performance, debt servicing capacity continued to strengthen, backed by the growing cash flow from operations and prompt payments from the customers.

Debt leverage position has been improving on the back of commendable revenue growth and strong margin. During FY2003, KMT’s total borrowings primarily consisted of the FRNs (RM350 million) and government soft loan (RM310 million). KMT may also undertake an additional government soft loan of RM860 million to be progressively drawn down in the near term to finance the expansion of the container and liquid bulk terminals. However, KMT’s debt servicing capacity will not be affected in the medium term because of the 5-year moratorium on interest and principal payments granted by the Government. Going forward, the container business shall continue to be the main revenue contributor for the company in view of the better outlook for the local port sector supported by various government initiatives.