MARC has affirmed its AAIS rating on ANIH Berhad's RM2.5 billion Senior Sukuk Musharakah Programme with a stable outlook. ANIH is the concessionaire of Kuala Lumpur-Karak Highway (KL-Karak) and Phase 1 of East Coast Expressway (ECE1) until 2032. Its toll concession for Kuala Lumpur-Seremban Expressway (KL-Seremban) ended on May 31, 2018; the impact to ANIH, however, is minimal.
The affirmed rating reflects the progressive traffic growth of ANIH’s portfolio of matured assets, KL-Karak and ECE1, that underpins ANIH’s relatively stable cash flow generation. ANIH’s cash flow coverage remains comfortable for debt servicing, even in the event of a toll hike deferral without government compensation. The rating also benefits from the subordinated and equity-like features of ANIH’s RM620 million Junior Bonds that allow the concessionaire to withstand moderate operational underperformance. The stable outlook incorporates the rating agency’s expectation that ANIH will continue to demonstrate a commendable liquidity profile by maintaining healthy cash levels over the next 12-18 months.
For financial year ended March 31, 2019 (FY2019), traffic volume on KL-Karak and ECE1 grew 1.6% to 125,799 pcu/day and 2.8% to 23,412 passenger car units per day (pcu/day). Tolling revenue, however, declined 5.2% y-o-y to RM409.3 million, largely due to the cessation of the KL-Seremban concession agreement. Operating profit before interest, tax, depreciation and amortisation (OPBITDA) also fell 34.8% y-o-y to RM224.1 million. This was mainly due to the acceleration of certain maintenance and road widening payments. There were also some preliminary expenses incurred in FY2019 in relation to ANIH’s planned RM1.5 billion road-widening works on KL-Karak.
For 1HFY2020, ANIH’s financial performance returned to a more normal level, registering OPBITDA of RM145.5 million with a margin of 68.5%. ECE1 and KL-Karak both continued to record increases in traffic volume, up 5% and 2% to 24,579 pcu/day and 130,548 pcu/day. MARC notes that the concessionaire has also pared down its principal repayment of RM120 million on November 29, 2019, following which the outstanding stood at RM1.95 billion.
During the review period, traffic volume on KL-Karak and ECE1 grew at a slower pace than that projected by the traffic consultant, Halcrow Consultant Sdn Bhd. Nonetheless, MARC expects the gap to narrow gradually as more attractions are unveiled at Genting Highlands. This notwithstanding, we have revised downwards the base case traffic for KL-Karak and ECE1 by 3% and 5%. Under this scenario, ANIH’s minimum and average pre-distribution finance service coverage ratio (FSCR) with cash balances are forecast to be healthy at estimated 3.0x and 3.9x.
In the event of toll hike deferrals without any cash compensation from the government throughout the sukuk tenure, our projections indicate that ANIH will still be able to maintain its FSCR above the covenanted 1.75x, with the coverage being most susceptible in FY2026 (minimum 2.20x) due to a step-up in principal repayment to RM220 million that year. MARC views ANIH to be in a better position than other similar toll concessionaires to weather through any domestic toll industry regulatory changes. Additionally, MARC derives comfort from the restrictive post-distribution FSCR of 2.50x, that ensures sufficient cash flow coverage.
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Contacts: Lim Chi Ching, +603-2717 2963/ chiching@marc.com.my ; Hafiza Abdul Rashid, +603-2717 2955/ hafiza@marc.com.my .
[This announcement is available on MARC’s corporate website at www.marc.com.my ]
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