RAM Ratings reaffirms AAA(bg) rating of EKVE sukuk

Published on 23 Nov 2021.

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RAM Ratings has reaffirmed the AAA(bg)/Stable rating of EKVE Sdn Bhd’s (EKVESB or the Company) Guaranteed Sukuk Murabahah Facility of up to RM1 bil in Nominal Value (the Sukuk). The rating reflects the irrevocable and unconditional guarantees extended by AAA-rated Maybank Islamic Berhad and Bank Pembangunan Malaysia Berhad. 

EKVESB is the concessionaire for the East Klang Valley Expressway (EKVE or the Project or the Expressway) – a 36.16 km closed-toll system which starts from Sungai Long in Kajang and terminates at Ukay Perdana in Ampang. This is pursuant to a 50-year concession agreement (CA) with the Government of Malaysia (GoM). 

As at end-August 2021, the Project’s construction progress stood at 91.5%. Construction of the Expressway has been delayed for more than two years (initial scheduled completion date: 9 September 2019). The recent delays stemmed from the pandemic-induced movement restrictions and stringent standard operating procedures (SOPs) imposed by the GoM over the past year. Earlier delays were due to holdups in land acquisitions, approval of bridge designs and rock blasting works. 

The Expressway is expected to be completed by end of 2021, with tolling to commence in early 2022. It will reach full completion once the bridge works, pavement works, and construction of toll plazas are constructed. We have, however, assumed completion of the Project to be in line with the latest extension of time (EOT) granted by the Malaysian Highway Authority, extending the Project’s completion date to January 2022. That said, any unforeseen circumstances beyond EKVESB’s control could further disrupt construction progress.

While no cost overruns are expected, RAM’s sensitised cashflow projection has included a 5% cost overrun on the remaining RM1.55 bil budgeted construction cost (which stood at around RM120 mil as at end-August 2021). EKVESB’s sole shareholder, Ahmad Zaki Resources Berhad (AZRB), remains committed to back the Project financially until its completion – covering any potential construction cost overrun as well as honouring EKVESB’s financial covenants and obligations under the Sukuk. AZRB’s commitment to extend financial support to the Project is exhibited via a completion guarantee and letter of undertaking to see the Project through to completion. AZRB’s weakened financial profile over the past few years however, may limit its capacity to support the Project. 

Consequential to the extended delay in project completion and tolling, the mismatch in cash flows as measured against annual debt repayment obligations suggest that a refinancing of the Sukuk in the near term is pivotal to ensure continued servicing of the Sukuk. Under RAM’s stressed analysis, EKVESB’s liquidity position will be extremely tight from early-2022 onwards, putting its debt obligations in July 2022 at risk if tolling is further delayed beyond January 2022. We have considered traffic-related risks in the sensitised case.

The Expressway completes the Kuala Lumpur Outer Ring Road network and improves connectivity for north-south traffic flows in the eastern part of the Klang Valley. The prospect of its traffic volume, however, may be hampered by initial high toll rates and competing infrastructures such as the Sungai Besi-Ulu Kelang Expressway and the Sungai Buloh-Kajang MRT line. 

As with most concession-related projects, the Company is exposed to regulatory and single-project risks.


Analytical contact
Yip Chee Meng
(603) 3385 2516

Davinder Kaur Gill
(603) 3385 2525


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

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