Wednesday, Mar 26, 2003
MARC has reaffirmed the ratings of GDC (KLIA) Sdn Bhd’s (GDC KLIA) RM207 million Murabahah Commercial Paper/Medium-Term Notes at MARC-1ID/AA-ID (double A minus, Islamic debt securities). The reaffirmations reflect GDC KLIA’s captive offtake demand for its chilled water and electricity, strong shareholder support, low operation risk and improved financial performance. The ratings, however, continue to be moderated by the credit quality of its offtakers and GDC KLIA’s high, though declining debt leverage.
GDC KLIA operates and maintains the District Cooling System/co-generation plant that supplies chilled water and electricity to facilities at the Kuala Lumpur International Airport (KLIA), under a 20-year government concession (effective from January 1998). Strong shareholder backing is provided by PETRONAS, with an effective shareholding of 72.5%.
The tariff for chilled water incorporates a demand charge and a variable charge. Annual revenue derived from the demand (or capacity charge) lends an element of stability to the company’s cash flow. The variable charge is based upon consumption and is expected to contribute an increasing proportion of operating revenue, going forward. The sale and purchase agreements for chilled water and electricity allow GDC KLIA to pass through increases in gas costs to its users. Given that gas cost forms the bulk of the company’s operating cost, the automatic pass through mechanism mitigates the company’s exposure to escalating gas prices.
The facilities at the KLIA complex are dependent on the company for the supply of chilled water to meet their air-conditioning needs. GDC KLIA’s major offtakers are Malaysia Airports (Sepang) Sdn. Bhd., Malaysian Airline System Berhad and KL Airport Services Sdn Bhd. GDC KLIA benefits from a captive market for its plant’s chilled water and electricity output. MARC is, however, concerned about the late payments from offtakers; based on the debtors ageing profile as at 31 March 2002, about RM6.6 million or 27.5% of total trade receivables were overdue for more than 90 days [FYE3/2001:RM1.4 million (52.3%)]. Close monitoring of GDC KLIA’s accounts receivable is essential to prevent liquidity problems.
The plant remains underutilized as a result of KLIA’s passenger loads that are still significantly below the airport’s passenger handling capacity. Total passenger movements at KLIA for the year 2001 was approximately 16.5 million per annum vis-à-vis its capacity of 25 million passengers per annum. Approximately 89% of the plant’s production capacity is projected to be taken up only by the year 2012.
GDC KLIA’s financial performance continued to improve in FYE3/02; pre-tax profit surged by 62.9% to RM29.0 million (FY3/01:RM17.8 million) on the back of a 15.3% increase in revenue to RM92.3 million (FYE3/01:RM80.0 million). Over the years, the company’s pre-tax profit has been growing at a rate of more than 60% per annum. The improved results reflect a significant increase in demand from the offtakers as well as lower financing costs. Operating profit margin has, consequently, improved to 37.3% (FYE3/01:31.1%).
Debt leverage continued to improve for the period under review, settling at 1.3 times in FYE3/02 (FYE3/01:2.2 times). Given the progressive repayment of existing debts, retention of earnings and absence of any major capital expenditure requirement, GDC KLIA’s debt leverage is expected to improve further in the near-to-medium-term.
GDC KLIA operates and maintains the District Cooling System/co-generation plant that supplies chilled water and electricity to facilities at the Kuala Lumpur International Airport (KLIA), under a 20-year government concession (effective from January 1998). Strong shareholder backing is provided by PETRONAS, with an effective shareholding of 72.5%.
The tariff for chilled water incorporates a demand charge and a variable charge. Annual revenue derived from the demand (or capacity charge) lends an element of stability to the company’s cash flow. The variable charge is based upon consumption and is expected to contribute an increasing proportion of operating revenue, going forward. The sale and purchase agreements for chilled water and electricity allow GDC KLIA to pass through increases in gas costs to its users. Given that gas cost forms the bulk of the company’s operating cost, the automatic pass through mechanism mitigates the company’s exposure to escalating gas prices.
The facilities at the KLIA complex are dependent on the company for the supply of chilled water to meet their air-conditioning needs. GDC KLIA’s major offtakers are Malaysia Airports (Sepang) Sdn. Bhd., Malaysian Airline System Berhad and KL Airport Services Sdn Bhd. GDC KLIA benefits from a captive market for its plant’s chilled water and electricity output. MARC is, however, concerned about the late payments from offtakers; based on the debtors ageing profile as at 31 March 2002, about RM6.6 million or 27.5% of total trade receivables were overdue for more than 90 days [FYE3/2001:RM1.4 million (52.3%)]. Close monitoring of GDC KLIA’s accounts receivable is essential to prevent liquidity problems.
The plant remains underutilized as a result of KLIA’s passenger loads that are still significantly below the airport’s passenger handling capacity. Total passenger movements at KLIA for the year 2001 was approximately 16.5 million per annum vis-à-vis its capacity of 25 million passengers per annum. Approximately 89% of the plant’s production capacity is projected to be taken up only by the year 2012.
GDC KLIA’s financial performance continued to improve in FYE3/02; pre-tax profit surged by 62.9% to RM29.0 million (FY3/01:RM17.8 million) on the back of a 15.3% increase in revenue to RM92.3 million (FYE3/01:RM80.0 million). Over the years, the company’s pre-tax profit has been growing at a rate of more than 60% per annum. The improved results reflect a significant increase in demand from the offtakers as well as lower financing costs. Operating profit margin has, consequently, improved to 37.3% (FYE3/01:31.1%).
Debt leverage continued to improve for the period under review, settling at 1.3 times in FYE3/02 (FYE3/01:2.2 times). Given the progressive repayment of existing debts, retention of earnings and absence of any major capital expenditure requirement, GDC KLIA’s debt leverage is expected to improve further in the near-to-medium-term.