Published on 12 May 2021.
RAM Ratings has reaffirmed the AA1/Stable rating of UniTapah Sdn Bhd’s (the Company) Sukuk Murabahah of up to RM600 mil (2014/2035). The reaffirmation is premised on the Company’s steady cashflow and strong debt service coverage.
UniTapah was tasked to develop and maintain University Teknology MARA’s (UiTM) campus in Perak under a 23-year concession. Under the concession, the Company receives fixed and timely monthly payments comprising availability charges (ACs) and maintenance charges (MCs). While maintenance is undertaken externally through Everfine FMS Sdn Bhd (Everfine) - a subsidiary of listed GFM Services Berhad. Unitapah’s maintenance track record has been commendable over the last few years. This has translated into minimal deductions/penalties for underperformance of KPIs. The fixed payments to Everfine are net of deductions/penalties, thus mitigating the risk of rising costs.
UniTapah’s finance service coverage ratio (FSCR, with cash balances) came up to 2.12 times in December 2020, against RAM’s projected 1.99 times, supported by UiTM’s prompt payments. Going forward, UniTapah’s repayment capacity should be sustained by recurring ACs, steady cash accretion and the Company’s commendable maintenance track record. RAM’s stressed assumptions include a two-month delay in the receipt of ACs, zero maintenance margins and declining annual interest income (on cash reserves). Based on this, UniTapah is expected to register respective minimum and average FSCRs of 1.86 and 2.15 times throughout the Sukuk’s tenure. Meanwhile, the transaction’s counterparty risk is deemed low, as the Government of Malaysia — via UiTM — is the ultimate obligor of the concession payments.
The sukukholders’ interests are safeguarded by the transaction’s tight financing structure and restrictive covenants, which include prohibiting distributions to shareholders or added indebtedness while the Sukuk is outstanding. Moreover, designated accounts - operated by the Security Trustee and with well-defined flows of funds - have been set up to capture the inflow of concession payments.
This transaction is, however, weaker than the other RAM-rated private finance initiative/public-private partnership projects due to a lack of direct assignment to concession rights, an AC offset clause for underperformance, and insufficient compensation under a termination scenario. Despite this, termination risk due to non-performance is deemed remote, thanks to UniTapah’s commendable track record and the non-complex maintenance work.
Hafiz Abdul Aziz
(603) 3385 2534
Davinder Kaur Gill
(603) 3385 2525
(603) 3385 2577
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Ratings on UniTapah Sdn Bhd