|Subcategory||Infrastructure & Utilities - Toll Road|
|Date Article||2021-01-12 00:00:00|
|Title||CERAH SAMA SDN BHD|
MARC has affirmed its AA-IS rating on Cerah Sama Sdn Bhd’s RM420.0 million sukuk with a stable outlook. Cerah Sama is the investment holding company of Grand Saga Sdn Bhd, the concessionaire of the 11.5-km Cheras-Kajang Highway.
The rating affirmation is premised on the company’s (1) resilient cash flows and stable revenue base (underpinned by steady traffic performance on the mature Cheras-Kajang Highway); (2) strong cash reserves; and (3) the accommodative sukuk repayment structure. Moderating the rating is Cerah Sama’s leveraged capital structure.
The stable rating outlook reflects MARC’s assessment that Cerah Sama will be able to generate sufficient cash flow and maintain healthy cash levels to meet its financial obligations. MARC also expects that Cerah Sama will exercise discipline with regard to its dividend distribution and ensure its liquidity and leverage metrics are not compromised.
Traffic levels at its Batu 9 and Batu 11 toll plazas were affected by the Movement Control Order (MCO) imposed by the government to contain the COVID-19 pandemic. Traffic volume was down 53.8% during the MCO period between March and May 2020 against the previous year’s corresponding period. However, traffic has rebounded strongly since the easing of movement restrictions, with traffic between June and September 2020 reaching volumes just 5%-6% below the levels in the corresponding period in 2019.
During the first nine months of 2020 (9M2020), average daily traffic (ADT) for Batu 9 and Batu 11 toll plazas collectively declined by 20.7% to 117,601 vehicles, largely a result of the drop in traffic flow during the MCO period. Toll revenue (comprising actual toll collection and apportionment of past compensations received) in 1H2020 was registered at RM33.5 million. The company maintains a relatively strong liquidity position, supported by RM90.1 million of cash and cash equivalents as at October 31, 2020. This should be sufficient to meet the sukuk’s RM39.97 million principal and profit obligations due on January 29, 2021.
For a matured highway asset, Cerah Sama’s leverage remains moderately high with a DE ratio of 4.1x as at 1H2020 (2019: 3.9x). This is largely due to sizeable dividend payments.
Under Cerah Sama’s base case forecasts, minimum and average pre-distribution financial service cover ratio (FSCR) with cash balance are projected at 2.4x and 3.0x over the 2020-2030 period, well above the covenanted FSCR of 1.75x. Under MARC’s sensitised scenario of a 20% fall in traffic volume in 2021 compared to 2019, minimum FSCR is still projected to stay above the covenanted 1.75x, albeit narrower at about 2.3x compared to the base case’s 2.4x. Incorporating a one-year delay in the scheduled 2025 toll hike to 2026 and a one-year delay in the payment of toll compensation, however, could have a more significant impact on the FSCR. Prudent dividend upstreaming becomes increasingly important in this regard.
Major Rating Factors
• Steady performance from mature asset, Cheras-Kajang Highway;
• Undemanding repayment schedule; and
• Low operational risk.
• Moderately high leveraged capital structure.