MARC has affirmed its AAID long-term rating on MTD InfraPerdana Bhd’s (MTD InfraPerdana) RM700.0 million Islamic Medium-Term Notes (IMTN) programme. The rating outlook is stable. The rating reflects strong earnings and cash flow generation of its two wholly-owned toll concessionaires, in particular MTD Prime Sdn Bhd (MTD Prime) that are supported by sustained traffic flows on completed highways. The rating outlook is premised on expectations of the continued adequacy of distributions generated by MTD Prime to provide high levels of consolidated finance service coverage ratios. These strengths, however, are moderated by traffic volume risk and MTD InfraPerdana’s lowered access to equity market funding following its delisting from Bursa Malaysia in early 2009.

MTD Prime holds a 38 year concession expiring in July 2032 for the 60km Kuala Lumpur-Karak Highway (KL-Karak) and a 28 year concession on an extension of KL-Karak, the 170km East Coast Expressway Phase 1 (ECE1). KL-Karak is the main artery linking the capital city to Karak in Pahang, while the ECE1 links Karak to the border of the east coast state of Terengganu. Both KL-Karak and ECE1, which began operations on July 1994 and January 2005 respectively, have continued to record positive traffic volume growth. For financial year ending March 31, 2009 (FY2009), traffic volumes for KL-Karak and ECE1 have risen by 3.77% and 11.53% as compared to 1.82% and 20.76% in FY2008. As the KL-Karak is a relatively matured toll road, annual growth rates are not likely to exceed 5% going forward.

MTD InfraPerdana’s other toll concessionaire is Metramac Corporation Sdn Bhd (Metramac) which was acquired from Metacorp at end-2005. Metramac was awarded a 23 year concession for the 9km KL-Seremban Expressway that connects the Jalan Istana Interchange to the Sungai Besi Toll Plaza and the 8km East-West Link (EWL) that connects Cheras and Seputeh areas within the Klang Valley. The remaining life of the concession for both of these toll roads is 9 years. Traffic volumes in both KL-Seremban Expressway and EWL continue to be pressured given the availability of alternative routes. In FY2009, the KL-Seremban Expressway saw a decrease in traffic volume by 4.49% due to traffic diversion to the Maju Expressway which began operations in December 2007. Maju Expressway links the city centre from Jalan Tun Razak to the Federal Government Administrative Centre at Putrajaya. Traffic volume of the EWL decreased by 2.11% in FY2009 with some traffic reverting to the toll-free Jalan Cheras, following completion of the Len Seng interchange and upgrading works on Jalan Loke Yew in October 2008.

MTD InfraPerdana achieved revenues of RM291.21 million in FY2009 (FY2008: RM277.47 million), of which tolls collected from the KL-Karak contributes approximately 45% to total revenues. MTD InfraPerdana’s finance service cover ratio (FSCR) of 5.5 times (x) and 4.7x in FY2008 and unaudited FY2009 indicates sufficient head room compared with its minimum covenanted level of 1.75x.

MTD InfraPerdana’s gearing as measured by debt-to-equity was 1.85x as at March 31, 2008, rising significantly from a year earlier following the drawdown of RM600.0 million from the IMTN. Nevertheless, this remains within the covenanted level of 2.25x. The IMTN proceeds were used to partially fund its capital repayment exercise. Following a selective capital repayment exercise beginning 2008, MTD InfraPerdana became a wholly-owned company of Bursa Malaysia listed MTD Capital Bhd. MTD InfraPerdana was subsequently delisted from Bursa Malaysia on January 22, 2009.

As MTD InfraPerdana’s next toll hike is only due in 2010, for the ECE1, there are no immediate concerns of insufficient toll rate hikes or deferment of scheduled toll increases. The stable outlook on the rating reflects expectations that MTD InfraPerdana will maintain its FSCR at its current strong level on the assumption that operating performance of MTD InfraPerdana’s toll concessionaires will remain supportive of dividend upstreaming to the holding company.

Contacts:
Ezien Hoo 03-2090 2267 / ezien@marc.com.my ;
Khairul Emran Mahmud 03-2090 2278 / emran@marc.com.my