Wednesday, Dec 20, 2023
MARC Ratings has affirmed its AA-IS rating on Cerah Sama Sdn Bhd’s RM420.0 million Sukuk with a stable outlook. The outstanding currently stands at RM300.0 million.
The rating continues to reflect the resilient traffic performance of the mature Cheras-Kajang Highway and its stable cash flow generation. Cerah Sama’s strong liquidity position and accommodative sukuk repayment structure are also positive rating considerations. Moderating the rating is the company’s moderately high leveraged balance sheet, albeit on an improving trend.
Traffic volumes have continued to improve, with the average daily traffic reaching 157,420 vehicles through 10M2023, up 6.7% from 2022 (147,502 vehicles) and 6.2% above the pre-pandemic 2019 level of 148,161 vehicles. Toll revenue (before compensation) improved 31% y-o-y to about RM71.5 million in 2022 on strong recovery post-pandemic. The positive momentum has continued this year with Cerah Sama reporting 9M2023 toll revenue of RM67.0 million, up 6.8% from the corresponding period in 2022. Assuming recent traffic trends hold, toll revenue could settle around RM75 million this year before toll compensation.
Liquidity remained relatively strong, with cash and cash equivalents of about RM67.6 million as at end-September 2023, which would be sufficient to meet the sukuk’s RM30.0 million principal repayment due on January 31, 2024. Cerah Sama’s debt-to-equity ratio, however, remained relatively high at 1.9x as at end-September 2023, although it has trended lower over time due to scheduled sukuk repayments. Cash dividend distribution was also lower in 2022 at RM7.1 million compared to RM32 million to RM40 million a year in the four years prior.
The company projects a minimum pre-distribution finance service cover ratio (FSCR) of 2.9x in 2028 with an average of 4.0x for the 2024-2030 period. MARC Ratings’ sensitised case — assuming delayed toll compensation and slower traffic growth of 1% p.a. — yields an average pre-distribution FSCR of 2.8x, with a minimum of 1.0x in 2030. Dividend distribution may need to be reduced by about one-third from the base case assumptions over 2024-2030 to comply with the 1.75x post-distribution FSCR covenant. In this regard, MARC Ratings continues to expect Cerah Sama to maintain a prudent dividend approach and protect its credit metrics.
Contacts:
Tan Weng Kit, +603-2717 2961/ wengkit@marc.com.my
Hafiza Abdul Rashid, +603-2717 2955/ hafiza@marc.com.my