The rating of MTD Prime Sdn Bhd’s (MTD Prime) RM250 million Al-Bai Bithaman Ajil Islamic Debt Securities (BaIDS) has been affirmed at AAID. The rating reflects the continuous traffic and revenue growth from the KL–Karak Highway (KLK) and the inclusion of the toll revenue from the East Coast Expressway Phase 1 (ECE1) into the coffers of the company. In addition, the half yearly principal redemption of the BaIDS has reduced the outstanding amount to RM50.0 million contributing to MTD Prime’s relatively low gearing. The rating carries a Stable Outlook.

The KLK continued to register positive traffic growth in 2005, carrying a total traffic of 29.0 million passenger car units (pcu) (2004: 27.7 million pcu), reflecting its importance as a major access road to the east coast of Peninsular Malaysia. In the first half of 2006, KLK recorded actual traffic volume of 14.2 million pcu which was similar to the traffic volume in the first half of 2005 level but higher than the Support Traffic Volume (STV) of 12.2 million pcu for the same period. The STV is the minimum traffic growth guaranteed by the Government of Malaysia as part of the concession of the KLK. If the actual traffic volume falls below the STV level in any particular year, the Government will be liable to compensate MTD Prime for the loss in income. The STV is based on a compounding annual growth rate of 5.0% starting from 1994.

Revenue improved by 43% to RM167.7 million in FYE March 2006 (FY2005: RM116.70 million) due to increasing traffic volume on both the KLK and the ECE1. Toll collection from ECE1 commenced in January 2005 and contributed RM15.7 million to MTD Prime’s revenue in FY2005 and about RM68.0 million in FY2006. MTD Prime’s pre-tax profit, meanwhile, increased to RM93.1 million in FY2006 from RM57.5 million in FY2005. Nevertheless, there was a decline in operating margin in FY2005 due to the inclusion of operational costs from the ECE1 combined with increases in repair works.

MTD Prime’s cash flow position has shown strong improvement in FY2006, with cash flow generated from operations climbing to positive territory after posting negative returns during the previous two financial years. Notwithstanding this, MTD Prime has continued to show its ability to meet the obligation on the BAIDS.

In FY2006, the company’s leverage level improved further to 0.55x from 0.74x in FY2005 and 0.76x in FY2004 resulting from the progressive redemption of the BaIDS where the last tranche will mature in 2007.