KUALA LUMPUR: RAM Rating Services has reaffirmed the AA2/Stable rating of Kesas Sdn Bhd’s RM735mil Sukuk Musharakah Islamic medium term notes (2014/2023) on expectations of rising traffic volumes.
The ratings agency said on Thursday the reaffimation of the ratings was based on the Shah Alam Expressway’s satisfactorily increasing traffic volumes, underpinned by its strategic alignment and mature profile.
The operating history of almost 20 years is backed by the strong debt-servicing aptitude of Kesas.
Kesas is the toll concessionaire for the 35-km expressway, which forms part of the Middle Ring Road 2 system in the Klang Valley, linking the Kuala Lumpur-Seremban Highway in the east and Pandamaran in the west.
In fiscal 2016, the expressway maintained its satisfactory traffic-volume growth, registering an average daily traffic (ADT) of 341,179 vehicles (+3.4% on-year).
While the extended light rail transit (LRT) line, part of which runs parallel with the expressway, started on June 30, 2016, the full impact from the LRT extension has yet to be felt given its limited operating track record.
“We expect the Shah Alam Expressway ADT expansion to average 2% during the years without tariff increases and decline 10% when rates are raised,” it said.
RAM Ratings said this was after factoring in the impact from alternative routes (such as the New Pantai Expressway and Federal Highway Route 2), the recently commissioned LRT extension and knee-jerk dip in years when there are toll-rate hikes.
Based on RAM’s stressed scenario, Kesas is expected to achieve an average annual pre-financing cashflow of RM206mil.
This translates into a strong minimum finance service coverage ratio (with cash balances, post-distribution) of 2.25 times throughout the remaining tenure of the Sukuk.
At the same time, Kesas is envisaged to optimise dividends while adhering to its covenants.
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