Friday, Dec 30, 2005
The reaffirmation of Kuching Port Authority’s (KPA) Islamic debt securities at AAA(s) reflects the strength of the support provided by the State Government of Sarawak, through the Letter of Support, in ensuring the timely and full redemption of the RM180 million Al-Bai’ Bithaman Ajil Islamic debt Securities (BaIDS). Hence, the current rating of KPA reflects the credit strength of the state of Sarawak which is superior to KPA’s credit standing.
The state’s economic growth has been strong averaging 6.1% over the past four years, and it is projected to be 6.0% in 2005. As a resource-rich state with a solid economic base, Sarawak’s underlying creditworthiness is based on its sound budgetary performance. A supportive relationship with the Federal Government also boosts Sarawak’s credit quality. On average, over the last four years, the state has recorded operating balances in excess of 50% of operating revenue. The state’s gross debt remained low at about 51% of the state’s revenue in 2002 compared to 55% in 2001. Mitigating these factors are the contingent liabilities, which pose the largest risk to Sarawak’s credit profile, largely due to the state government’s involvement in the 1st Silicon project. Nevertheless, Sarawak’s revenue outlook and its ability to sustain robust development expenditure are perceived positively and it is forecasted to have a surplus of RM30.0 million in 2005.
KPA is currently Sarawak state’s premier port serving and supporting the state’s economy. The port’s activities are, thus, very much dependent on the economic condition of the state and to some extent the global economy. In FY2004, the number of vessel calls at KPA increased for the 6th straight year since its decline in 1998, with Senari terminal recording the highest number. In line with this, cargo throughput continued to increase and reached its highest ever throughput in the last 10 years.
Despite the increase in the number of cargo throughput, which was mainly attributed to the increase in container volume (represented more than 50% of the total cargo throughput) and other cargo volume, KPA’s revenue declined in FY2004 compared to previous year, due to a drop in cargo volume (tonnage) for break bulk, liquid bulk and dry bulk. Consequently, the lower revenue and the higher total operating expenses had caused a drop in the operating profit which led to a drop in the operating margin of KPA. The higher financing costs during the period under review coupled with the lower operating income consequently led to a pre-tax loss of RM4.6 million (Total operating expenses includes RM13.7 million provision for depreciation).
KPA’s cash flow protection measures weakened in FY2004 due to significant reduction in its operating cash flows, compounded further by the higher financing costs. However, noteholders’ interests are protected through the availability of liquidity/credit support in the transaction structure in the form of revolving credit/overdraft facilities (RC/OD) of an aggregate amount of RM27 million and support from the state government. The RC/OD facilities shall be drawn down to cover any shortfall in funds for the purpose of meeting the redemption of either primary or secondary notes. Nevertheless, the financial assistance in the form of capital grants or otherwise from the State Government is expected to smoothen out any financial problems which KPA may face should the need arises.
The state’s economic growth has been strong averaging 6.1% over the past four years, and it is projected to be 6.0% in 2005. As a resource-rich state with a solid economic base, Sarawak’s underlying creditworthiness is based on its sound budgetary performance. A supportive relationship with the Federal Government also boosts Sarawak’s credit quality. On average, over the last four years, the state has recorded operating balances in excess of 50% of operating revenue. The state’s gross debt remained low at about 51% of the state’s revenue in 2002 compared to 55% in 2001. Mitigating these factors are the contingent liabilities, which pose the largest risk to Sarawak’s credit profile, largely due to the state government’s involvement in the 1st Silicon project. Nevertheless, Sarawak’s revenue outlook and its ability to sustain robust development expenditure are perceived positively and it is forecasted to have a surplus of RM30.0 million in 2005.
KPA is currently Sarawak state’s premier port serving and supporting the state’s economy. The port’s activities are, thus, very much dependent on the economic condition of the state and to some extent the global economy. In FY2004, the number of vessel calls at KPA increased for the 6th straight year since its decline in 1998, with Senari terminal recording the highest number. In line with this, cargo throughput continued to increase and reached its highest ever throughput in the last 10 years.
Despite the increase in the number of cargo throughput, which was mainly attributed to the increase in container volume (represented more than 50% of the total cargo throughput) and other cargo volume, KPA’s revenue declined in FY2004 compared to previous year, due to a drop in cargo volume (tonnage) for break bulk, liquid bulk and dry bulk. Consequently, the lower revenue and the higher total operating expenses had caused a drop in the operating profit which led to a drop in the operating margin of KPA. The higher financing costs during the period under review coupled with the lower operating income consequently led to a pre-tax loss of RM4.6 million (Total operating expenses includes RM13.7 million provision for depreciation).
KPA’s cash flow protection measures weakened in FY2004 due to significant reduction in its operating cash flows, compounded further by the higher financing costs. However, noteholders’ interests are protected through the availability of liquidity/credit support in the transaction structure in the form of revolving credit/overdraft facilities (RC/OD) of an aggregate amount of RM27 million and support from the state government. The RC/OD facilities shall be drawn down to cover any shortfall in funds for the purpose of meeting the redemption of either primary or secondary notes. Nevertheless, the financial assistance in the form of capital grants or otherwise from the State Government is expected to smoothen out any financial problems which KPA may face should the need arises.