MARC has affirmed its rating of AA+IS on Westports Malaysia Sdn Bhd’s (Westports) RM2.0 billion Sukuk Musharakah Programme with a stable outlook.
The rating reflects 1) Westports’ strategic location along one of the world’s busiest shipping routes and its favourable cargo-handling facilities; 2) the company’s steady financial performance under long-term concession agreement; 3) strong liquidity position and robust financial service coverage underpinned by strong cash generation; and 4) experienced management that is focused on enhancing the port’s competitive position through capital investment.
Moderating the rating are competition from other transhipment hubs such as Port of Tanjung Pelepas and Port of Singapore, as well as high client concentration risk. Westports is also exposed to volatility in activity levels as it is vulnerable to economic cycles and international trade flows. In this regard, the current COVID-19 pandemic could have serious implications for the global economy; against this backdrop, the rating agency is monitoring the impact on port operators in its rated universe.
That said, the rating of Westports remains supported by its strong financial profile, in particular its robust liquidity position. MARC’s stressed analysis does not indicate any immediate liquidity pressure, taking into consideration Westports’ high cash holding of around RM680 million that provides more than sufficient cover for the RM100 million due this year under the rated sukuk programme. The company also has sufficient financial flexibility in the form of available funding lines. MARC also expects Westports to prudently manage its dividend distribution and capital plan, maintaining financial metrics in line with debt covenants.