Apr 19 2012
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MARC affirms its AAIS ratings on Westports Sukuk issuances
Westports continued to register strong growth in container throughput which rose to 6.4 million twenty-foot-equivalent units (TEU) in 2011 against earlier projections of 6.0 million TEU (2010:5.6 million TEU). Westports' transhipment activity benefited from a pickup in the global trade along the Asia-Europe shipping route and growth in local import and export activity as a result of increasing trade between Malaysia and China. Westports' competitive advantage over domestic and regional ports is derived from its strong operational efficiencies, Port Klang's strategic location along one of the world's busiest shipping routes and competitive pricing vis-à-vis its main competitor, Singapore Port.
The port operator posted a 14.4% increase in its revenue to RM1.12 billion for the financial year ended December 31, 2011 (FY2011); Westports' pre-tax profit however, showed a 6.8% decline year-on-year to RM358.86 million. Westports' cash flow from operations (CFO) improved marginally to RM444.2 million (2010: RM433.7 million); however, the company's free cash flow turned negative, from positive RM234.6 million to negative RM345.5 million on the back of its expansion programme and a significant dividend payout in 2011. As at December 31, 2011, Westports' balance sheet cash amounted to RM349.7 million after redeeming RM100 million of borrowings under its MTN programme in March 2011 with borrowing availability under existing credit facilities and the rated programmes at RM2.1 billion. Westports has also redeemed a further RM100 million of its MTN programme in March 2012. MARC believes that Westports' liquidity profile will remain satisfactory in coming quarters in spite of its large planned capital spending in FY2012. Its capex of RM639.9 million on land reclamation works, construction of the second phase of Container Terminal 6 (CT6) and corresponding container yard and port machinery will be funded through additional borrowing of RM200 million, internally generated funds and the expected receipt of a government grant.
The stable outlook assumes that Westports' will exhibit satisfactory container volume and revenue growth to maintain appropriate credit metrics for the current ratings. A significant departure from expectations could lead to downward pressure on the ratings.
© Press Release 2012
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