Published on 29 Apr 2020.
RAM Ratings has reaffirmed the AAA(fg)/Stable rating of TRIplc Ventures Sdn Bhd’s (TVSB or the Company) MTN Programme of up to RM240 mil in nominal value (2011/2026). The rating reflects the irrevocable and unconditional financial guarantee provided by Danajamin Nasional Berhad (rated AAA/Stable/P1 by RAM). Excluding the guarantee, repayments of the MTN will be supported by TVSB’s steady stream of cash inflows in the form of monthly Availability Charges (ACs) and Maintenance Charges (MCs) under its concession.
TVSB is the concessionaire for the development and maintenance of Zone 1 Phase 2 of the Universiti Teknologi MARA (UiTM) campus in Puncak Alam, Selangor (the Project). This comes under the 23-year tripartite Concession Agreement between the Government of Malaysia (GoM) as represented by the Ministry of Higher Education, UiTM and TVSB.
Following the successful completion of the Project on 10 April 2014, TVSB is entitled to monthly ACs for 20 years up to April 2034. The Company also receives fixed MCs over the same period, in return for maintaining the campus. The GoM may review the scope and rates of MCs every five years. There has been no change in the MCs after the initial five-year period that ended on 10 April 2019. TVSB’s maintenance track record has been commendable to date. The Company has been able to keep its Key Performance Indicators (KPIs) well above the target 93%. Failure to meet KPIs will lead to the imposition of demerit penalties and deductions of MCs. In 2019, net performance-related deductions increased to 4% (2018: 2%) following two sizeable amounts in January and October 2019. Maintenance work has been sub-contracted to TRIplc FMS Sdn Bhd since December 2019.
Going forward, TVSB’s debt-servicing ability is expected to remain strong, with respective stressed minimum and average Debt Service Coverage Ratios (with cash, calculated over a 12-month period on profit/principal payment months) of 1.49 and 1.67 times. The Company is anticipated to generate an annual pre-financing cashflow of RM29 mil-RM39 mil after meeting maintenance expenses and administrative costs. Despite outperforming our stressed projections in 2019, we caution that rising costs may impinge on TVSB’s ability to pay upcoming dividends and coupon payments under its Junior Notes. That said, the Junior Notes is subordinated to the MTN and any deferrals of payment on the former is not tantamount to an event of default.
Timeliness is key to the transaction as any delay may adversely affect TVSB’s debt-servicing aptitude and liquidity. So far, payments from UiTM have been consistent. In 2019, MCs were received within 11 days from invoice submission while ACs averaged 52 days. Both figures are within RAM’s 90-day stress analysis.
Certain events may lead to the termination of the concession. This will not only disrupt concession payments but also jeopardise TVSB’s ability to meet its obligations. Given the non-complex maintenance services and the Company’s commendable track record, termination risk is deemed remote.
The outbreak of the COVID-19 pandemic in Malaysia has prompted a nation-wide movement control order. As some students have remained on campus, the UiTM campus and ancillary facilities remains operational, albeit on a reduced scale. Should there be delays in meeting its KPIs due to difficulties in getting spare parts and third-party contractors to undertake operation and maintenance works, TVSB has been advised by UiTM to seek an extension of time, to avoid incurring demerits and/or deductions.
Davinder Kaur Gill
(603) 3385 2577
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Ratings on TRIplc Ventures Sdn Bhd