MARC Ratings has upgraded its rating on Segi Astana Sdn Bhd’s RM415.0 million ASEAN Green Medium-Term Notes (MTN) to AA- from A+. The upgrade on the MTN rating follows the upgrade on Segi Astana’s standalone rating to A+ from A. Segi Astana’s MTN rating of AA- incorporates a single notch uplift on account of the liquidity support undertaking by parent WCT Holdings Berhad (WCT), which holds an indirect 70% interest in the company. Through the undertaking, WCT has committed to ensure sufficient funds are in place, or a refinancing is completed, to meet Segi Astana’s final MTN redemption. WCT carries a rating of AA- with a negative outlook. Accordingly, the rating outlook on Segi Astana’s programme is aligned to that of its parent. 

Should WCT’s rating be downgraded, the rating on the MTN would reflect Segi Astana’s standalone rating (A+/Stable). Conversely, if WCT’s rating outlook were to be revised to stable, the rating outlook on the MTN would also be revised to stable. Segi Astana is the concessionaire for the integrated complex, gateway@klia2, at Kuala Lumpur International Airport Terminal 2 (KLIA Terminal 2) in Sepang, Selangor.

The upgrade on Segi Astana’s standalone rating reflects the sharp turnaround in the business and financial performance of the concessionaire on the back of a steep improvement in the occupancy level of the gateway@klia2 mall and fee income from the car park at the integrated complex at KLIA Terminal 2. The rating is moderated by the backloaded amortising structure of the MTN programme under which a sizeable payment is due in January 2028 when it expires, that would necessitate refinancing or direct payment by WCT. The rating agency notes that the 10-year extension of the concession to August 2047 from August 2037 provides headroom to refinance the final MTN repayment, if necessary. 

As at end-June 2023, the occupancy rate of gateway@klia2 — with a net lettable area (NLA) of around 380,000 sq ft — was 78% (end-May 2022: 60%). It is expected to reach 93% over the near term as incoming tenants finalise their plans. Concomitant with the significant increase in footfall as air travel recovered sharply from the lows of the pandemic period, the average monthly collection for rental payments and car park fees (from its 5,690 parking bays) rose to RM6.4 million and RM4.0 million (1H2022: RM4.1 million; RM1.7 million). As a result, Segi Astana’s operating cash flow doubled y-o-y to almost RM40 million for 1H2023. 

MARC Ratings views the prospects for Segi Astana to continue improving, supported by management initiatives — which commenced during the pandemic lockdown — to enlarge the NLA, optimise tenant mix, and undertake asset enhancement and repairs. The rating agency notes that while overall passenger traffic at KLIA Terminal 2 grew to 11.2 million in 1H2023 (1H2022: 4.2 million), this remains about 68% of pre-pandemic traffic (1H2019: 16.5 million). As such, further recovery in footfall is highly likely which will be positive for retail sales at the mall and car park usage. 

As at end-June 2023, cash balances of RM55.0 million are sufficient to meet the upcoming RM30 million notes repayment in January 2024. MARC Ratings notes that Segi Astana’s liquidity position has also been supported by the issuance of redeemable preference shares (RPS) to WCT Land Sdn Bhd, its immediate holding company, which had subscribed to a combined RM86 million RPS to date. Assuming Segi Astana sustains its current performance, it would have the ability to meet the remaining MTN repayments, save for the expected refinancing of RM135 million MTN maturing at the end of the programme tenure in January 2028. 

Umar Abdul Aziz, +603-2717 2962/ umar@marc.com.my

Cyndy Goh, +603-2717 2941/ cyndy@marc.com.my  

Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my