KUALA LUMPUR: Bright Focus Bhd, which owns 96.8% of tolled road concessionaire Maju Expressway Sdn Bhd (MESB), has proposed to issue up to RM1.35bil in Islamic securities.
RAM Rating Services said on Tuesday it had assigned a preliminary long-term rating of AA2, with a stable outlook.
MESB is the concessionaire of the 26-km Maju Expressway which offers a direct link between Kuala Lumpur and Putrajaya and Cyberjaya.
"As the repayment of the proposed Sukuk relies solely on cashflow from MESB, the preliminary rating reflects the strong project economics and robust financial profile of the company, supported by the covenants under the transaction structure," said RAM Ratings.
To recap, Maju Expressway started collecting tolling in 2008 and traffic volume has increased by a compounded annual growth rate (CAGR) of 20%, with average daily traffic at its two toll plazas reaching 100,000 vehicles in 2012.
RAM Ratings said Bright Focus was expected to show a robust debt-servicing aptitude, supported by sturdy dividends from MESB, which are in turn, backed by the highway's steady traffic growth and the scheduled toll-rate increases under MESB's concession.
Its finance service cover ratio is projected to come up to at least 2.25 times.
However, the ratings agency cautioned the group should conserves cash in favour of distributions to its shareholder - Maju Holdings Sdn Bhd - to meet the proposed Sukuk's expected debt-coverage levels.
"Excessive distributions to its shareholder will be detrimental to the proposed Sukuk's rating," it said.
RAM Ratings said the construction of a new 1.7-km Seri Kembangan interchange along the highway is expected to boost MESB's earnings, via a new toll plaza and the extension of its concession by up to eight years.
Although the new interchange will improve access and provide new catchment areas, the lower toll rate at the new Sri Kembangan toll plaza may cause traffic to shift away from the existing Putrajaya toll plaza.
RAM Ratings said the proposed Sukuk's rating was moderated by construction risk in relation to the RM112mil Seri Kembangan interchange, scheduled to be completed by early 2015.
While MESB has yet to appoint a contractor for these works, construction risk is considered less pronounced as most of the road will be at grade and is unlikely to affect the operation of the highway.
The government has earmarked RM20mil for ongoing land acquisition, with about 20% of the required land comprising private lots while the rest is government-owned. Any cost in excess of this amount will be borne by MESB.
"Notably, the government had earlier deferred the construction of a 18-km section of the Maju Expressway leading to KLIA. MESB is expected to undertake a study to determine the feasibility of constructing this proposed extension, 5 years after tolling has commenced for the expressway," it said.