CREDIT ANALYSIS REPORT

GAS DISTRICT COOLING (PUTRAJAYA) SDN BHD - 2022

Report ID 6053890046955 Popularity 63 views 6 downloads 
Report Date Nov 2022 Product  
Company / Issuer Gas District Cooling (Putrajaya) Sdn Bhd Sector Infrastructure & Utilities - Gas District Cooling
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Rationale
Rating action

MARC Ratings has affirmed its AAAIS rating on Gas District Cooling (Putrajaya) Sdn Bhd’s (GDC Putrajaya) RM300 million Al-Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS) with a stable outlook. The current outstanding of RM50 million BaIDS is payable on December 2, 2022.

Rationale

The rating affirmation factors in a three-notch rating uplift for parental support from Putrajaya Holdings Berhad (PJH) on which MARC Ratings maintains a long-term credit rating of AAA/stable. The support assessment considers GDC Putrajaya as a strategic wholly-owned subsidiary of PJH given the company’s specific role as the sole supplier of chilled water in Putrajaya and past evidence of financial support extended by the parent.

On a standalone basis, GDC Putrajaya’s credit profile reflects its strong competitive position as the sole provider of an essential utility within Putrajaya. The company generates steady revenue stream under its long-term agreements with strong counterparties, which provides significant operating stability and strong cash flow visibility. 

Operating revenue remained broadly stable at around RM237.5 million in 2021 while operating profit before interest and tax (OPBIT) jumped 61.1% on lower cost of sales and a reversal of certain impairment loss. Without the latter, OPBIT would still improve, albeit lower at 43.9% y-o-y growth. Based on its 1H2022 performance, GDC Putrajaya should be able to finish the full year with revenue in the range of RM240 million to RM250 million and OPBIT margin of around 25%. The expected lower OPBIT margin compared to the 36% recorded in fiscal year 2021 (excluding reversal of impairment loss) takes into account the costlier dry gas this year. We expect GDC Putrajaya’s exclusive position in the market and stable business profile to continue to support a consistent operating performance, hence continuity of its sound financial profile.

GDC Putrajaya maintains a strong balance sheet, with a very low debt-to-equity (DE) ratio of 0.09x as at end-June 2022. Its liquidity is also strong. The company had cash and cash equivalents of RM158.3 million as at end-June 2022, which is more than sufficient to cover its total debt of RM50.6 million, including the final repayment of RM50 million BaIDS that is due on December 2, 2022. Solid operating cash generation (annual CFO between RM83 million to RM106 million in the past three years) also supports liquidity and should continue to provide the company with the financial flexibility to maintain a strong balance sheet.

Rating outlook

The stable outlook reflects our expectation that GDC Putrajaya will continue to maintain solid business fundamentals and sustain its strong credit metrics. We also expect parental support to be forthcoming should the need arise. 

Rating trajectory

Upside scenario 

Not applicable as the rating is already at the highest level on MARC Ratings' scale.

Downside scenario

Pressure on the rating could arise from a negative rating action on PJH, but this is unlikely in the near term.

Key rating factors
  • Strong support from parent Putrajaya Holdings Berhad
  • Sole supplier of chilled water in Putrajaya
  • Contracted demand charges cover fixed operating and financing costs
  • Conservative capital structure and solid liquidity position

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