MMC PORT HOLDINGS SDN BHD - 2022 |
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| Report ID | 605389004672 | Popularity | 831 views 99 downloads | |||||
| Report Date | Mar 2022 | Product | ||||||
| Company / Issuer | MMC Port Holdings Sdn Bhd | Sector | Infrastructure & Utilities - Port/Airport | |||||
| Price (RM) |
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| Rationale |
Rating action MARC Ratings has assigned a rating of AA-IS on MMC Port Holdings Sdn Bhd’s (MMC Port) proposed RM1.0 billion Sukuk Murabahah Programme. The rating carries a stable outlook. Rationale The rating is driven by MMC Port’s very strong competitive position among transhipment port operators regionally and among gateway port operators domestically, as well as its well-established track record in developing and operating container and conventional ports. A key moderating factor to the rating is MMC Port’s susceptibility to economic cycles, particularly trade flows that can weigh on port handling volumes. Wholly owned by MMC Corporation Berhad (MMC), MMC Port is the holding company for five domestic port operators: Pelabuhan Tanjung Pelepas Sdn Bhd (PTP), Northport (Malaysia) Bhd (Northport), Penang Port Sdn Bhd, Johor Port Berhad, and Pelabuhan Tanjung Bruas Sdn Bhd. The ports have long operating track records and generate healthy earnings, supported by continued investments in port infrastructure. As the second-largest transhipment port in the country with total handling capacity of 12.5 million twenty-foot equivalent units (TEUs), PTP recorded a healthy container volume of 5.6 million TEUs in 1H2021 (1H2020: 4.6 million TEUs). Its business has been supported by its other shareholder A. P. Moller Maersk S/A which has a 30% stake in PTP and is the largest container shipping line and vessel operator in the world. Its other southern port, Johor Port, is a major conventional domestic port handling key commodities such as palm oil and grains. In the central region, Northport remains a key port for both gateway and transhipment liners while Penang Port has a significant role in serving the industrial areas in northern Peninsula Malaysia as well as in southern Thailand. On a consolidated basis, MMC Port recorded 8.5 million TEUs (1H2020: 7.0 million TEUs) and an improved operating margin of 34.5% in 1H2021 (1H2020: 28.2%) on the back of revenue of RM1.8 billion (1H2020: RM1.5 billion). Improved consolidated cash flow from operations (CFO) of RM768.6 million led to a stronger interest and debt coverage of 6.04x and 0.21x for 1H2021. Over the near term, group performance is expected to be supported by seaborne trade which has been projected to grow at about 4.0% p.a. over the next five years. The healthy cash flow generation will allow the ports to fund their respective capex largely through internal funds. For 2022-2023, the group has planned capex of about RM3.2 billion, the bulk of which will be channelled to PTP and Northport . Group consolidated borrowings stood at about RM6.0 billion at end June-2021, of which RM1.1 billion is an outstanding term loan at the holding company which was undertaken in 2015 for the acquisition of the equity stake in NCB Holdings Bhd. Proceeds from the proposed rated issuance will be used to refinance the outstanding term loan. The rest of the group borrowings are at the respective operating companies and have favourable maturity profiles. Group debt-to-equity (DE) ratio stood at 1.27x at end-1H2021. Proceeds from the expected listing of MMC Port on Bursa Malaysia over the medium term will strengthen its balance sheet. While the current high gearing level reflects the capital-intensive nature of port operations, the port tariff structure provides support to the operating entities in generating healthy profit margins. Dividend income from the operating entities is expected to address MMC Port’s financial obligations; in 2020, it received RM322 million in dividends. Rating outlook The stable rating outlook incorporates our expectation that MMC Port’s operating entities will continue to benefit from the projected growth in trade through its strong operations. Rating trajectory Upside scenario Any likelihood of an upgrade in the rating will stem from a sustained strong operating performance and downward trend in leverage to below 0.7x. Downside scenario The rating could come under pressure if there is a sharp rise in group and/or holding company borrowings that will weigh on cash flow metrics. In addition, any large dividend distribution to the holding company that puts pressure on liquidity may affect the rating. Key strengths • Diversified portfolio of matured ports • Established operating track record in port development and operations • Very strong competitive position • Strong profitability Key risks • Susceptible to developments in global economies and trade • Subsidiaries’ capex and financial obligations may hinder dividend income |
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