Published on 28 Oct 2021.
RAM Ratings has reaffirmed the AA3/Stable rating of Besraya (M) Sdn Bhd’s (the Company) RM700 million Sukuk Mudharabah Issuance Facility (2011/2028).
The reaffirmation reflects our expectation that the long-term traffic and cashflow profiles of the Sungai Besi Highway and the Besraya Eastern Extension (collectively, the Highway) will remain supportive of the transaction’s strong cashflow coverage levels. This is despite a weaker finance service coverage ratio (FSCR), with cash balances (post-distribution) that is likely to test the Sukuk’s AA3 rating minimum threshold of 2 times in the near term in view of pandemic-induced movement restrictions.
The Highway’s average daily traffic (ADT) contracted to a respective 114,378 vehicles (-26.5%) and 87,969 vehicles (-14.6%) in FY Mar 2021 and 5M FY Mar 2022 (FY Mar 2020: 155,550 vehicles). Compared against revenue in FY Mar 2020, total revenue loss in FY Mar 2021 summed up to about RM38.0 mil, at the expense of shareholders’ distributions. The decline is viewed to be temporary as traffic is expected to rebound following the relaxation of movement restrictions since August 2021, the latest of which is Klang Valley’s move to Phase 4 of the National Recovery Plan, effective 18 October 2021. The inter-state travel restriction has also been lifted on 11 October 2021. In September 2021, the Highway’s ADT reached about 75% of levels prior to the crisis.
Our stressed scenario assumes a gradual traffic recovery and a one-year delay in the receipt of government compensation for non-revision of tariffs. In such a case, we expect Besraya to meet the minimum FSCR of 2 times throughout the sukuk’s remaining tenure except 28 July 2022. Its minimum and average FSCRs are envisaged to come in at 1.79 times and 2.22 times, respectively. While we have imputed a one-year delay in compensation receipts, Besraya’s sukuk rating might come under pressure should the Company’s compensation receipts be delayed beyond this period. The Government of Malaysia (GoM) has honoured its payment obligations to date, albeit with some delays.
Similar to other toll road concessionaires, Besraya is inherently exposed to regulatory and single project risks. Potential termination or expropriation of its concession for the Highway is an event risk. Under such a circumstance, the GoM will be obligated to compensate Besraya as provided for in the concession agreement.
Wong Ee Loo
(603) 3385 2521
Davinder Kaur Gill
(603) 3385 2525
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Ratings on Besraya (M) Sdn Bhd