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RAM Ratings affirms AA1 rating of Triplc Medical’s Senior Sukuk
Published on 21 Aug 2023.
RAM Ratings has affirmed the AA1/Stable rating of Triplc Medical Sdn Bhd’s (the Company) RM639 mil Senior Sukuk Murabahah (2017/2035) (Senior Sukuk). The affirmation reflects our expectation that the Company’s debt servicing ability will remain intact, supported by a steady inflow of monthly Availability Charges and the satisfactory maintenance of a teaching hospital and academic complex on Universiti Teknologi MARA’s (UiTM) Puncak Alam campus.
Excluding cash reserves earmarked for construction-related costs, the Company’s finance service coverage ratios (FSCRs, with cash balances, post-distribution, calculated on payment dates) were a healthy 1.75 times and 1.89 times in October 2022 and April 2023, respectively.
While Triplc Medical may opt to make distributions to shareholders if it meets post-distribution FSCRs of at least 1.65 times, the Company should be mindful of its longer-term cashflow profile and debt coverage measures in determining distributions. Given sizeable past distributions, the transaction’s liquidity buffers are thinner and unable to absorb any further concession payment delays without compromising future FSCRs.
Operationally, UiTM has yet to fully utilise the teaching hospital since its completion. As such, the Company continues to receive reduced asset management service charges (AMSCs) from the university. The decrease in AMSCs and deductions for non-performance incurred to date are fully passed through to TRIplc FMS Sdn Bhd (Triplc FMS) – the operation and maintenance (O&M) operator. The Company’s key performance indicator score was a commendable 90.2% on average in FY Dec 2022, with deductions amounting to only 2.5% of billed maintenance concession flows.
The sukuk rating is moderated by the fact that Triplc Medical and the O&M contractor lack experience in hospital maintenance, which is deemed more complex than the O&M of non-specialised buildings. This risk is mitigated by contracting experienced third parties and employing skilled staff in line with the requirements of the concession agreement (CA).
Triplc Medical is also exposed to single-project and regulatory risks. Compensation prescribed in the Company’s CA with UiTM and the Government of Malaysia offers sukukholders sufficient protection in the event that the concession is terminated due to a default by Triplc Medical and/or UiTM.
Analytical contacts
Hani Hamizah Nor Hashim
(603) 3385 2575
hani@ram.com.my
Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, in as much 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.
Published by RAM Rating Services Berhad
© Copyright 2023 by RAM Rating Services Berhad
