RAM Ratings has reaffirmed the AA2/Stable rating of Kesas Sdn Bhd's (the Company) RM735 million Sukuk Musharakah IMTN (2014/2023). The reaffirmation of the rating continues to reflect the Shah Alam Expressway's (SAE or the Expressway) robust traffic profile as well as the strong debt-servicing aptitude of Kesas - the toll concessionaire for the 35-km SAE linking the Kuala Lumpur-Seremban Highway in the east and Pandamaran in the west.
The SAE maintained healthy traffic-volume growth in FY Jul 2015, registering average daily traffic (ADT) of 329,844 vehicles (+6.2% annualised), attributable to the continued organic increase of traffic on the Expressway. Based on RAM's estimates, the SAE's ADT growth is envisaged to average 2.1% during years when there are no rate increases and decline 4.5% when rates are increased. Further, the Expressway is projected to observe a 2% decrease in addition to the traffic-volume growth/decline rate upon commencement of operations of the extended Ampang LRT line (anticipated in 2017), part of which will run parallel to the former.
Based on our stressed scenarios, Kesas is projected to generate an average annual pre-financing cashflow of up to RM216.17 million, translating into strong minimum FSCRs (with cash balances, post-distribution) of 2.25 times for the remaining tenure of the Sukuk, in line with an AA2-rated transaction. Meanwhile, Kesas is expected to optimise dividends while adhering to its covenants throughout the Sukuk's tenure.
As with other toll-road projects, the Company is inherently exposed to regulatory and single-project risks. Despite an expected toll-rate hike in 2016 in accordance with the concession agreement, we do not discount the possibility of the tariff revision being deferred or restructured. Should Kesas not be fully compensated with cash under either scenario, our stress analysis indicates that the Company would have to curtail its dividend payout to maintain its debt-servicing ability.
Media contact
Wang Wai Wah
(603) 7628 1110
waiwah@ram.com.my
© Press Release 2015
