MARC Ratings has affirmed the AA-_IS rating on Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd’s (Kesturi) RM2.3 billion Sukuk Musharakah (Senior Sukuk) and the A- rating on Kesturi’s RM180 million Redeemable Secured Junior Bonds, with a stable outlook. The rating differential reflects the Junior Bonds’ subordinated position.

Kesturi owns and operates Duta-Ulu Kelang Expressway Phase 1 (DUKE 1) and Phase 2 (DUKE 2). The Senior Sukuk rating reflects the highways’ stable, predominantly commuter-based traffic and strong connectivity within the Klang Valley, supported by a long concession tenure that mitigates refinancing risk. These strengths are moderated by high leverage and potential delays in receipt of toll hike compensation payments.

Traffic continued to trend upwards, with annual average daily traffic increasing marginally to 235,942 vehicles in financial year ended June 2025 (FY2025) (FY2024: 234,820) and rising further to 241,804 vehicles in 7MFY2026. Kesturi’s financial profile remains strong, with the average Senior finance service coverage ratio (FSCR) projected at 4.25x over FY2026–FY2034 under MARC Ratings’ sensitised assumptions of zero traffic growth, no toll rate adjustments, and a one-year delay in compensation receipts. While FSCR may temporarily fall below the 1.75x covenant due to compensation delays, this is assessed as a timing issue rather than an indication of underlying credit weakness, supported by resilient long-term traffic demand.

Leverage remains elevated but improved to 3.7x as at end-January 2026. It is expected to decline further, supported by continued repayments and stronger shareholders’ funds. Liquidity is adequate, supported by RM186.5 million of cash and around RM215 million of expected operating cash flow in 2026 against RM250.0 million sukuk maturity due on 2 December 2026.