View Credit Analysis Report (605379)

Aid605379
StatusPublished
CategoryReport
SubcategoryProject Finance
CoidANIHSB
Appoletid0
Date Article2021-01-06 00:00:00
PublicYes
TitleANIH BERHAD - 2020
Content
MARC has affirmed its AAIS rating on ANIH Berhad's RM2.5 billion Senior Sukuk Musharakah Programme with a stable outlook. ANIH is the concessionaire of Kuala Lumpur-Karak Highway (KL-Karak) and Phase 1 of East Coast Expressway (ECE1) until 2032.

The affirmed rating reflects ANIH’s healthy cash flow generation and adequate debt coverage, underpinned by stable traffic performance of KL-Karak and ECE1. The rating also benefits from the subordinate and equity-like features of ANIH’s RM620 million Junior Bonds which should provide some cushion against operational underperformance. However, high gearing remains a key rating constraint for ANIH. The stable outlook on the rating reflects MARC’s expectation that ANIH will continue to demonstrate a commendable liquidity profile by maintaining healthy cash levels over the next 12-18 months.

KL-Karak and ECE1’s traffic data over April-July 2020 reflected the impact of COVID-19. Traffic on KL-Karak and ECE1 fell 47.3% and 41.5% y-o-y during the period, but have rebounded strongly since May 2020 after measures to curb the spread of the virus were eased in the country; road travel has in fact returned to pre-coronavirus levels by July 2020.

Notwithstanding some weaknesses in the last few months following the coronavirus crisis, traffic on the mature KL-Karak and ECE1 has been on a path of steady, albeit moderate, growth. Road traffic for the two highways has grown at a compound annual growth rate (CAGR) of 1%-2% over FY2015-FY2019 and MARC expects this to continue once the COVID-19 pandemic is brought under control. 

However, in the current coronavirus context, we have revised ANIH’s rating case to reflect a scenario that includes a 30% and a 20% decline in traffic for KL-Karak and ECE1 in FY2021, a recovery to 90% of FY2020’s level in FY2022, a full recovery by FY2024 and a growth trend of 1%-2% onwards. In this scenario, average Finance Service Cover Ratio (FSCR) is projected at 2.15x with a minimum coverage of 1.93x in FY2028. Our projections indicate that ANIH would be able to withstand a revenue decrease of 32% y-o-y in FY2021 and still meet the 1.75x covenanted FSCR. ANIH is also estimated to be able to withstand a 56% reduction in revenue in FY2021 and still serve its financial obligations with an FSCR of 1.0x, indicating the strength of the company to absorb a more serious traffic shock. 

Major Rating Factors

Strengths
Matured toll roads with stable traffic profiles; 
Loss-absorbing junior ranking debt; and
Protective covenants with adequate restriction on distributions. 
Challenges/Risks
Leveraged capital structure; and
Traffic volume growth susceptible to general economic activity. 

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