CREDIT ANALYSIS REPORT

SISTEM PENYURAIAN TRAFIK KL BARAT SDN BHD - 2019

Report ID 60484 Popularity 915 views 34 downloads 
Report Date Apr 2020 Product  
Company / Issuer Sistem Penyuraian Trafik KL Barat Sdn Bhd Sector Infrastructure & Utilities - Toll Road
Price (RM)
Normal: RM500.00        
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Rationale
MARC has affirmed its A+IS rating on toll concessionaire Sistem Penyuraian Trafik KL Barat Sdn Bhd’s (SPRINT) Al-Bai Bithaman Ajil Islamic Debt Securities (BaIDS). The outlook on the rating remains developing. To date, the proposed takeover of the four highway concession assets under Gamuda Berhad including SPRINT is still unresolved. The cut-off date to negotiate and finalise the terms of the definitive agreements was originally expected to be concluded by December 31, 2019 before being extended to February 29, 2020. Nevertheless, with the recent change in government, this seems likely to be deferred further. Timelines, existing bond redemption values and explicit details on toll discounts are, therefore, unclear at this juncture. 

The rating affirmation reflects SPRINT’s strong cash flow coverage, underpinned by its relatively mature traffic profile, and ample cash reserves. While traffic on the 26.5-km interlinked SPRINT highways (comprising Damansara Link, Kerinchi Link and Penchala Link) had been affected to some degree by higher toll rates and competition from public transport and newer highways, the company’s minimum debt service coverage ratio (DSCR) with cash is still expected to stay comfortably above the covenanted 1.5x. Under MARC’s base case assumption, minimum DSCR with cash for the period FY2020–FY2021 is projected around 2.3x.  

Moderating the rating is SPRINT’s somewhat leveraged capital structure. Nevertheless, it had recently redeemed RM128.0 million principal on the BaIDs, leaving a final RM80.0 million due on December 29, 2020. This should be adequately covered by SPRINT’s healthy cash reserves that stood at over RM277.5 million as at end-January 2020.   

Major Rating Factors

Strengths
Strong cash flow coverage from relatively mature highways; 
Financial flexibility on deferred debt service of government support loan; and 
Debt repayment ability supported by strong cash reserves.

Challenges/Risks
Traffic underperformance from interlinked tolled roads;
Moderately high leveraged capital structure; and
Competition from toll-free alternative routes and new highways.


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