The rating of MTD Prime Sdn Bhd’s (MTD Prime) Al-Bai Bithaman Ajil Islamic Debt Securities (BaIDS) has been upgraded to AAID. The enhancement in the rating is a reflection of the continuous traffic growth at the KL–Karak Highway (KLK) and the strength of the company’s financial profile underpinned by the strong revenue and pre-tax profit growth which are expected to be further strengthened with the full tolling revenue contribution from the East Coast Expressway Phase 1 (ECE1). Additionally, the half yearly principal redemption of the BaIDS has led to an outstanding bond size net of sinking fund balances of RM64.02 million reflecting MTD Prime’s lower debt exposure.

KLK’s traffic growth improved by 7.9% to 27.7 million per passenger car unit (pcu) in 2004 (2003: 25.7 million pcu) and the strong traffic growth was underpinned by the recovery of the SARS outbreak which consequently led to improvement in the tourism industry. For the remainder of the tenure of the BaIDS, the company projects a traffic growth of 7% per annum. In addition to the strong traffic profile at the KLK, the commencement of the ECE1 on 1 September 2004 is expected to generate positive contribution to MTD Prime’s tolling revenue. For FY2006 and FY2007 respectively, the company expects collections from ECE1 to contribute around 40% and 39% of MTD Prime’s revenue.

MTD Prime’s revenue improved by 31.1% to RM116.70 million (FY2004: RM89.05 million) in FY2005 due to the recognition of tolling revenue from ECE1, which commenced its toll collections in
January 2005. MTD Prime’s operating profit margin declined to 59.55% (FY2004: 67.55%) mainly due to 94.8% increased in cost of sales arising from commencement of ECE1 and higher major maintenance cost incurred. Despite the increase in the cost of sales, the company’s profitability was increased due to the 37.2% fall in finance cost following the waiver of the government support loan as part of the compensation package for the lower toll rates for Gombak and Bentong tolls in 2002. Pre-tax profit, consequently, increased to RM57.46 million in FY2005 from RM40.98 million in the previous year. Revenue from toll collection of the completed ECE1 is expected to contribute towards MTD Prime’s revenue for years to come.

Cash generated from operations turned deficit as MTD Prime advanced an additional of RM56.55 million (FY2004:227.27million) to its holding company, MTD InfraPerdana Bhd for capital repayment. Even with the advances MTD Prime has shown its ability to meet the debt obligations on the BaIDS as reflected by the outstanding amount to-date of RM90.0 million.

The company’s debt leverage improved further to 0.74x in FY2005 despite the slight increase in total borrowings. The improvement in the company’s debt-to-equity ratio was due to the increase in the shareholders’ funds fed by the MTD Prime’s higher earnings in the last fiscal year. At the maturity of the BaIDS, refinancing risk should be fairly mitigated because of the progressive redemption of the BaIDS on a semi-annual basis.