ANIH Bhd - 2012

MARC has affirmed its rating on ANIH Berhad's (ANIH) RM2.5 billion Senior Sukuk Musharakah Programme (Sukuk Programme) at AAIS with a stable outlook.

The affirmed rating reflects consistent traffic growth for ANIH’s portfolio of mostly matured toll concessions, namely the Kuala Lumpur-Karak Highway (KL-Karak), Phase 1 of the East Coast Expressway (ECE1) and the Kuala Lumpur-Seremban Expressway (KL-Seremban), the adequacy of its cash flow generation for the financial year ended March 31, 2012 (FY2012) and projections of future cash flow. The rating is also supported by the subordination of the RM620.0 million unrated Junior Bonds which buffers sukukholders against adverse scenarios. Meanwhile, the rating is moderated by the company’s high gearing level and susceptibility to delays in toll hikes.

The KL-Karak and ECE1, the highway concessions of which constitute the main revenue sources of ANIH, continued to exhibit strong traffic growth of 6.7% and 11.8% respectively in FY2012 (FY2011: 3.8%, 9.3%). The improved traffic growth over the previous financial year has been attributed to better commercial traffic and stable fuel prices during the year. Both highways also benefit from their strong competitive positions as the main route linking the eastern region to the central and southern regions of Peninsular Malaysia. Furthermore, the current traffic volume of the KL-Karak and ECE1 has exceeded traffic projections for FY2013, providing additional comfort. Meanwhile, traffic volume on the KL-Seremban improved by 4.1%, allaying MARC’s concerns of congestion limiting traffic growth. Nevertheless, the KL-Seremban is only expected to contribute less than 10% of ANIH’s revenue over the tenure of the programme as the concession will expire in 2018.

For the last four operating months of FY2012, ANIH recorded revenue of RM108.2 million and a pre-tax loss of RM10.6 million against projected revenue of RM116.2 million and pre-tax profit of RM24.3 million. Revenue was marginally lower in spite of the improved traffic largely due to a shorter operating period compared to the projections and accrued interest expenses of RM60 million not taken into account in the projections. Nonetheless, the company’s cash flow from operations (CFO) and closing cash balance of RM69.6 million and RM160.7 million respectively were in line with expectations. ANIH’s projected CFO and closing cash balance were RM69.9 million and RM165.4 million respectively.

ANIH’s projected minimum and average finance service cover ratios (FSCRs) of 1.97 times and 3.00 times respectively are consistent with the AA rating. The achievement of the forecast FSCRs is dependent upon the implementation of scheduled toll hikes in 2015 and 2020. Hence, ANIH’s credit profile may come under pressure as a result of potential delays in the toll hikes which will see toll rates for the KL-Karak and ECE1 increase by 17% to 21% respectively. With the repayment of its Sukuk Programme commencing in 2014, ANIH’s annual debt servicing requirements are projected to range between RM185 million and RM235 million for the period 2015 through 2020 while its projected FSCRs range between 2.05 times and 2.88 times.

The stable outlook incorporates MARC's expectations that traffic growth would remain robust in the near to medium term and support ANIH’s cash flow generation ability. However, a meaningful erosion in ANIH’s finance service coverage or significant volatility in coverage will exert downward pressure on the senior sukuk rating.

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