BEWG (M) SDN BHD - 2022 |
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| Report ID | 605389003798 | Popularity | 863 views 43 downloads | |||||
| Report Date | Mar 2022 | Product | ||||||
| Company / Issuer | BEWG (M) Sdn Bhd | Sector | Infrastructure & Utilities - Utilities | |||||
| Price (RM) |
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| Rationale |
Rating action MARC Ratings has affirmed BEWG (M) Sdn Bhd’s (BEWG) RM400 million Sukuk Wakalah rating at AAIS with a stable outlook. BEWG is a 100%-subsidiary of Hong Kong–based Beijing Enterprises Water Group Limited (BEWGL) and was set up to undertake water and sewerage projects in Malaysia. Rationale The rating incorporates the credit strength of the Terengganu state government (AA-/Stable) which will make periodic payments under a scheduled payment structure to meet sukuk obligations upon certified completion of the project. The rating also factors in a one-notch uplift based on the credit strength of BEWGL which has provided an unconditional and irrevocable corporate guarantee (during construction stage) and a letter of undertaking to provide liquidity support to BEWG post completion if needed. MARC Ratings notes that BEWGL has provided the liquidity to meet the first and second sukuk repayments of RM120.0 million in July 2020 and RM90.0 million in July 2021 due to delays in completion of the project which far exceeded the original schedule of November 14, 2018 by 883 days. The project involved the refurbishment and upgrading of water treatment and distribution facilities in Kemaman, Terengganu. The delays had been mainly attributed to route realignment and weather conditions. The project was completed in March 2021 under approved Extension of Time (EOT) No. 4 and within budget (RM499.0 million), certified as finalised on August 9, 2021 and granted a Certificate of Practical Completion from the Terengganu state government on November 24, 2021. Following the certification, BEWG received RM129.63 million from the state government on December 14, 2021, the first of the six payments it is entitled to under the contract. As at end-January 2022, the outstanding sukuk stood at RM190 million, with the next financial commitment of RM85.15 million due on July 19, 2022 (RM80.0 million principal and RM5.15 million profit on the sukuk), for which the received payment from the state government has been set aside in the Finance Service Reserve Account (FSRA). Notwithstanding the scheduled payments from the Terengganu state government to repay the balance sukuk obligations, we opine that the demonstrated financial support from BEWGL will be forthcoming if required. BEWGL has a solid financial profile and a large liquidity buffer (with cash and cash equivalents of HK$15.5 billion or approximately RM8.3 billion as at end-June 2021). Rating outlook The stable rating outlook incorporates the expectation of timely contractual payments from the Terengganu state government, failing which the demonstrated financial commitment of the shareholder, BEWGL, will contribute to BEWG’s debt service. Rating trajectory Upside scenario A positive rating action is unlikely in the short term given the scheduled repayment structure of the sukuk. Downside scenario Downside pressure could arise if there are signs of inability of the Terengganu state government to meet subsequent payments and/or significant deterioration in the credit strength of BEWGL. Key strengths
Key risk
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