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.
Hani Hamizah Nor Hashim
(603) 3385 2575
Davinder Kaur Gill
(603) 3385 2525
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Ratings on TRIplc Medical Sdn Bhd