CERAH SAMA SDN BHD - 2023 |
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| Report ID | 60538900469666 | Popularity | 155 views 25 downloads | |||||
| Report Date | Dec 2023 | Product | ||||||
| Company / Issuer | Cerah Sama Sdn Bhd | Sector | Infrastructure & Utilities - Toll Road | |||||
| Price (RM) |
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| Rationale |
Rating action MARC Ratings has affirmed its AA-IS rating on Cerah Sama Sdn Bhd’s RM420.0 million Sukuk with a stable outlook. The outstanding under the rated programme stood at RM300.0 million as of November 12, 2023. Rationale Cerah Sama is the investment holding company of Grand Saga Sdn Bhd, the concessionaire of the 11.5-km Cheras-Kajang Highway. The rating continues to reflect the resilient traffic performance of the mature Cheras-Kajang Highway and its stable cash flow generation. The toll road has been operational since 1999. Cerah Sama’s strong liquidity position and accommodative sukuk repayment structure are also positive rating considerations. Moderating the rating is the company’s moderately high leveraged balance sheet, albeit on an improving trend. Traffic volumes have continued to improve, with the average daily traffic (ADT) reaching 157,420 vehicles through 10M2023, up 6.7% from 2022 (147,502 vehicles) and 6.2% above the pre-pandemic 2019 level of 148,161 vehicles. Traffic volumes in 2022 and 10M2023 at Batu 9 and Batu 11 toll plazas both overperformed Cerah Sama’s base case expectations by about 0.8%-1.1% and 5%-7%. Toll revenue (before compensation) improved 31% y-o-y to about RM71.5 million in 2022 on strong recovery post-pandemic and was in line with MARC Ratings’ sensitised case (in the range of RM70 million to RM75 million). In 2023, the good momentum continued with Cerah Sama reporting 9M2023 toll revenue of RM67.0 million, up 6.8% from the corresponding period in 2022. Assuming recent traffic trends hold, toll revenue could settle around RM75 million this year before toll compensation. Liquidity remained relatively strong, with cash and cash equivalents of about RM67.6 million as at end-September 2023, which would be sufficient to meet the sukuk’s RM30.0 million principal repayment due on January 31, 2024. Leverage, as measured by debt-to-equity (DE) ratio, remained relatively high at 1.9x as at end-September 2023, although it has trended lower over time due to scheduled sukuk repayments (end-2022: 2.3x; end-2021: 3.1x). Cash dividend distribution was also lower in 2022 at RM7.1 million compared to RM32 million to RM40 million a year in the four years prior. In this regard, we expect Cerah Sama to prudently distribute dividends without compromising liquidity and leverage metrics and adhere to a minimum finance service cover ratio (FSCR) of 1.75x. Cerah Sama’s FSCR for fiscal 2022 stood at 1.97x. Base case cash flow projections show a minimum pre-distribution FSCR of 2.9x in 2028 with an average of 4.0x for the 2024-2030 period. MARC Ratings’ sensitised case — assuming delayed toll compensation and slower traffic growth of 1% p.a. — yields an average pre-distribution FSCR of 2.8x, with a minimum of 1.0x in 2030. The dividend outflow as projected in the base case would have a more significant impact on the FSCR. Under the rating agency’s stress case sensitivity assumptions as above, dividend distribution may need to be reduced by about 32% from the base case assumptions over 2024-2030 to comply with the 1.75x post-distribution FSCR covenant. In this regard, MARC Ratings continues to expect Cerah Sama to maintain a prudent dividend approach and protect its credit metrics. Rating outlook The stable outlook reflects the rating agency’s assessment that Cerah Sama will be able to generate sufficient cash flow and maintain healthy cash levels to meet its financial obligations. MARC Ratings also expects Cerah Sama to exercise discipline on shareholder returns, ensuring its liquidity and leverage metrics are not compromised. Rating trajectory Upside scenario A rating upgrade is not expected in the near term. On a longer term, any upgrade will take into consideration a sustained improvement in profitability, cash flow generation and overall financial profile. Downside scenario The rating may be pressured if there is a sustained deterioration in the company’s financial metrics, which could arise, inter alia, from aggressive dividend flow and a weakening of management’s commitment to meet the covenanted FSCR level, or if there is a material degradation of traffic and revenue expectations. Key strengths
Key risk
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