PROFILE: Mian Ali, the Pakistani entrepreneur-turned-investor and new owner of UK’s HalalEat12 Jul 2018
Q&A: Raja Al Mazrouei on how Dubai’s FinTech Hive supports Islamic fintech05 Jul 2018
New government feel-good effect and Ramadan cushioned Malaysia’s economy from post-election shocks18 Jun 2018
INTERVIEW-How can new crowdfunder GlobalSadaqah improve transparency, impact of Islamic social finance?04 Jun 2018
INTERVIEW-How can Muslims give zakat more strategically? - Mohammad Raafi Hossain, founder, Finocracy25 May 2018
Muslims in India develop mutual health insurance scheme as alternative to takaful24 May 2018
Malaysian businesses hopeful for corruption-free future under new government12 May 2018
Five years of EFICA: How has the award benefited Islamic, ethical financial institutions?30 Mar 2018
INTERVIEW-Certified Shariah-compliant GOLDX to set gold standard for blockchain in Islamic fintech27 Feb 2018
Why should the Muslim world care about women-led social enterprises?23 Feb 2018
MARC has affirmed its AAAIS rating on Projek Lebuhraya Usahasama Berhad's (PLUS) RM23.35 billion Sukuk Musharakah Programme (sukuk) with a stable outlook. PLUS is the toll concessionaire of five major highways in Malaysia, of which the 772-kilometre (km) North-South Expressway (NSE) is its key highway in terms of revenue generation.
The rating affirmation continues to incorporate a two-notch rating uplift from PLUS’ standalone rating of AA on the basis of support assumption from the Malaysian government with respect to the sukuk. Among the key factors supporting this assumption are the interdependence between default events for the rated sukuk and the RM11.0 billion government-guaranteed sukuk (GG Sukuk) maturing after the rated programme. In addition, MARC considers the government’s golden share and indirect major shareholding in PLUS as well as the critical role of NSE in the country’s transportation system as factors underpinning the rating uplift. PLUS is jointly owned by UEM Group Berhad, a wholly-owned subsidiary of Khazanah Nasional Berhad, and the Employees’ Provident Fund.
PLUS’ standalone rating reflects its satisfactory cash flow coverages on the back of stable traffic performance of its portfolio of matured highways comprising New Klang Valley Expressway (NKVE), NSE, North-South Expressway Central Link (NSECL), Malaysia-Singapore Second Link (MSSL), Butterworth-Kulim Expressway (BKE) and the Penang Bridge. The standalone rating is, however, constrained by the concessionaire’s further deterioration in its gearing arising from aggressive dividend distributions on its redeemable convertible unsecured loan stock (RCULS). In addition, the potential impact on PLUS’ overall traffic volume resulting from new competing highways and alternative modes of public transportation would weigh on its credit profile.
PLUS’ overall traffic volume for 9M2017 is within MARC’s expectations. Traffic growth on NSE has plateaued after a period of commendable growth while NKVE’s growth reflects the congestion build-up arising from additional peak-period trips. Traffic volume on MSSL registered a growth of 6.9% during the period, largely on the back of ongoing developments surrounding Nusajaya and improved connectivity to west Johor Bahru via Gelang Patah, while NSECL grew by 5.2% y-o-y despite greater acceptance towards public transportation. In the northern region, both Penang Bridge and BKE’s traffic growth remained subdued in light of these highways’ mature traffic profile.
For 9M2017, PLUS' operational revenue declined to RM2.79 billion attributed to recognition of lower government compensation amounting to RM61.9 million. Consequently, PLUS’ net operating cash flow (CFO) decreased by 0.8% y-o-y to RM1.97 billion translating to a CFO interest coverage of 1.29 times in 9M2017. PLUS’ debt repayment ability remains adequate to cover its current annual financing obligations of RM1.53 billion. During the period under review, the substantial amount of coupon payment on its RCULS coupled with large accumulated losses have resulted in a higher debt-to-equity (DE) ratio. As at September 30, 2017, PLUS’ DE ratio stood at 74.9 times (9M2016: 26.1 times) vis-à-vis shareholders’ funds of RM405.8 million.
Under the base case scenario, PLUS’ financing coverage is projected to remain commensurate with its standalone rating level, registering minimum and average pre-distribution financial service coverage ratio (FSCR) of 2.87 times and 7.03 times. Sensitivity analysis shows the concessionaire's susceptibility to traffic growth decline on NSE compared to deferrals in toll rate increases and the absence of government compensation throughout the sukuk tenure. In MARC's view, the recent toll abolishment at Batu Tiga-Sungai Rasau and Bukit Kayu Hitam tolls which commenced in January 2018, is unlikely to impact PLUS as both these toll plazas only contributed about 2.73% to PLUS expressways’ tolling revenue, before taking into account the corresponding cost savings from the elimination of operations and maintenance.
Innovative Product Development of Islamic Banking & Finance
- Emirates Grand Hotel, Dubai - UAE
IFSB-FIS Workshop Series (Ivory Coast)
- Abidjan, Ivory Coast
Specialized Training Workshop on Islamic Micro & Agriculture Finance - Kenya
- The IFSB issues working paper on issues arising from changes in Takaful capital requirements
18 Jul 2018|regulations-compliance
- BRIEF-Mashreqbank Q2 Profit Rises
18 Jul 2018|finance-investing
- Habib Bank AG Zurich celebrates the first anniversary of their Islamic Banking Brand SIRAT
18 Jul 2018|distribution-logistics
- BRIEF-Qatar International Islamic Bank H1 Profit Rises
18 Jul 2018|finance-investing
Join the Community
Post discussions, discuss trending topics and network with other Islamic economy professionals.Register Now
Comprehensive Islamic finance and Islamic Economy reports by Thomson Reuters Islamic Finance Gateway.View All Publications
Publish Your Press Releases
Share your company's latest updates.Submit Your Press Releases