Wednesday, Mar 27, 2019
MARC has
affirmed its A+IS rating on toll concessionaire Sistem Penyuraian Trafik KL
Barat Sdn Bhd’s (SPRINT) Al-Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS).
Concurrently, the rating outlook has been revised to developing. SPRINT is the
toll concessionaire of the 26.5-km interlinked SPRINT highways comprising
Damansara Link, Kerinchi Link and Penchala Link in Kuala Lumpur.
The developing
outlook reflects the uncertainty on the outcome of negotiations between
SPRINT’s major shareholder, Gamuda Berhad, and the Malaysian government for the
latter to acquire the group’s four highway concession assets including SPRINT.
If the takeover of the highways is successful, the government has announced its
intention to replace the existing toll mechanism with a staggered tolling
structure that would impact toll revenue. The rating affirmation is primarily
based on SPRINT’s adequate cash flow coverage arising from its relatively
mature traffic profile and ample cash reserves that are sufficient to meet its
BaIDs payment. These factors are moderated by its highly leveraged capital
structure.
SPRINT’s
current cash balance in its designated accounts (excluding the operating
account) is sufficient to meet its upcoming BaIDS principal repayment of RM128
million in December 2019. SPRINT continues to record declining traffic volume;
for 8M2018, overall volume fell 5.4% y-o-y, led by Penchala Link (negative
11.7%), Kerinchi Link (negative 2.6%) and Damansara Link (negative 1.8%). As a
result, average daily traffic (ADT) for 8M2018 declined to 194,302 vehicles,
about 6.9% below projections.
For financial
year ended March 31, 2018 (FY2018), SPRINT’s toll collection revenue declined
2.6% y-o-y to RM186.6 million;
Penchala Link and Kerinchi Link continued to be the largest revenue contributor
to SPRINT in view of their higher toll rates compared to Damansara Link. SPRINT
recorded lower pre-tax losses of RM5.9 million on the back of lower
amortisation charges and finance costs. Cash flow from operations (CFO) stood
at RM171.3 million, lower than the RM219.8 million from the previous period
mainly due to the increase in receivables. Consequently, CFO interest coverage
stood lower at 3.04x (FY2017: 3.37x). Over the medium term, MARC views CFO
generation as sufficient to meet the final payment of RM80 million in December
2020. The rating agency also notes that the bulk of the government support loan
will commence only after the maturity of the rated BaIDS.
Based on
MARC’s sensitivity analysis, SPRINT would remain in compliance with the
covenanted debt coverage ratio of 1.50x should toll revenue on all links come
in 25% lower than the base case revenue. As at end-March 2018, SPRINT’s
debt-to-equity (DE) and facility DE ratio stood at 4.06x and 1.12x.
Contact:
Ati Affira
Kholid, +603-2717 2941/ affira@marc.com.my