MARC Ratings has affirmed its AA-IS and A- ratings on Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd’s (Kesturi) RM2.3 billion Sukuk Musharakah (Senior Sukuk) and RM180 million Redeemable Secured Junior Bonds with a stable outlook. The rating differential between the Senior Sukuk and Junior Bonds reflects the latter’s subordinated status in line with the rating agency’s methodology.
Kesturi owns and operates Duta-Ulu Kelang Expressway Phase 1 (DUKE 1) and Phase 2 (DUKE 2). The ratings reflect the assets’ demonstrated stable traffic profile, supported by its large commuter-based traffic. The ratings also reflect the project’s long concession life, which provides a 26-year tail after the sukuk’s maturity; the concession, which ends in August 2059 with an option for another 10-year extension, provides financial flexibility and mitigates refinancing risks.
In financial year ended June 30, 2024 (FY2024), traffic grew 5.3%, reaching an average annual daily traffic (AADT) of 234,820 vehicles. Traffic is likely to continue to grow at a low, single-digit rate in FY2025. Most recently, 1H2025 AADT surpassed that of fiscal 2024, having grown moderately to 235,144 vehicles.
Financial metrics for the Senior Sukuk are expected to remain strong, with the finance service coverage ratio (FSCR) averaging 3.20x from FY2025 to FY2034 under MARC Ratings’ sensitised assumptions of flat traffic levels, no toll hikes, and a one-year delay in government compensation. There could be occasions where the Senior FSCR falls below the covenanted 1.75x due to extended compensation delays. However, the rating agency views this as largely an issue of timing and believes that Kesturi’s business profile would remain robust, benefitting from resilient traffic demand.
MARC Ratings views Kesturi’s liquidity profile as adequate to meet its profit payment and upcoming sukuk maturity of RM240 million due on December 2, 2025. Meanwhile, leverage has steadily improved to 7.2x as at end-FY2024, from 12.2x a year prior. Given the amortisation of the sukuk, leverage should continue to improve.