GAS MALAYSIA DISTRIBUTION SDN BHD - 2023 |
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| Report ID | 60538900469459 | Popularity | 474 views 92 downloads | |||||
| Report Date | Jun 2023 | Product | ||||||
| Company / Issuer | Gas Malaysia Distribution Sdn Bhd | Sector | Industrial Products - Oil & Gas | |||||
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| Rationale |
Rating action MARC Ratings has affirmed its AAAIS /MARC-1IS ratings on Gas Malaysia Distribution Sdn Bhd’s (GMD) Islamic Medium-Term Notes (IMTN) programme and Islamic Commercial Papers (ICP) programme with a combined limit of up to RM1.0 billion. The ratings outlook is stable. As at end-April 2023, the outstanding amount under the programmes stood at RM241.0 million. Rationale The ratings reflect GMD’s strong market position in natural gas distribution and the predictable earnings and cash flow under the Incentive-Based Regulation (IBR) framework, which secures its approved annual revenue requirement (ARR) through tariff adjustments. Revenue comprises tolling fee from natural gas distribution through the NGDS. In 2022, GMD collected tolling fee amounting to RM498.8 million, 7.3% more than its ARR for the year. Accordingly, under the IBR framework, the distribution tariff for 2023 was adjusted lower to RM1.535/GJ/day through a rebate of RM0.038/GJ/day on the base tariff of RM1.573/GJ/day which has remained unchanged for the regulatory period 2 (RP2) covering 2023-2025. The ARR for 2023 has also been set lower considering the lower-than-projected operating expenditure in regulatory period 1 (RP1) (2020-2022). Nevertheless, its solid operating margins provide it with significant cushion against any downside risks. GMD spent RM171.0 million on its regulated capex in 2022, bringing the total spending over the course of RP1 to only 80% of its planned capex. This was mainly due to pandemic-related restrictions. In this regard, the remaining balance will be spent in 2023, allowing GMD to fully utilise the allocated capex under RP1. GMD has budgeted regulated capex to increase to approximately RM350.0 million (NGDS and non-NGDS capex) in 2023. In relation to this, borrowings are expected to increase moderately in 2023 to part fund capex but are unlikely to materially shift GMD’s debt-to-equity (DE) ratio from its current low of 0.18x. Rating outlook The stable outlook reflects MARC Ratings’ expectations that GMD will maintain its sole ownership of the NGDS and will adhere to a disciplined approach to financial management such that its profitability and leverage metrics remain commensurate with the current rating band. Rating trajectory Downward scenario Ratings pressure will be triggered by sharp increases in leverage position beyond the current forecast, and/or weakening cash flow or liquidity position. Key strengths
Key challenge
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