MARC Ratings has affirmed its AA-IS rating on MMC Port Holdings Sdn Bhd’s RM1.0 billion Sukuk Murabahah Programme with a stable outlook.
The rating affirmation is premised on the strength of the credit profile of MMC Port’s port subsidiaries which have healthy operating track records and strong cash flow generation abilities that provide dividend income to meet MMC Port’s financial obligations. MMC Port’s strong financial flexibility from its ownership of the port operators is a rating consideration. Moderating the rating is the susceptibility of its port operators’ performance to potential global economic slowdown and geopolitical risks.
MMC Port is a non-operating intermediate holding company of five key domestic port operators — Port of Tanjung Pelepas (PTP), Northport, Penang Port, Johor Port, and Tanjung Bruas Port — with a combined container handling capacity of 22.9 million twenty-foot equivalent units (TEUs). MMC Port is among the top 10 global port operators; it provides transshipment and gateway services, and benefits from the strategic location of the ports along the Straits of Malacca. The ports operate under long-term concessions.
For full year 2024, MMC Port is projected to receive dividends of about RM600 million (2023: RM548.9 million). The company has been upstreaming the bulk of dividends it receives to its immediate parent, MMC Corporation Berhad. Accordingly, liquidity at the holding company has been modest, just adequate to meet its profit payment obligations, although the rating agency expects MMC Port to retain sufficient liquidity by April 2027 when the first sukuk repayment of RM200 million of the outstanding RM1.0 billion sukuk is due.
Consolidated revenue and operating profit of RM2.1 billion and RM681.9 million for 1H2024 (1H2023: RM1.9 billion; RM558.4 million) reflected the increase in throughput volume across its ports. Consolidated borrowings stood at RM5.4 billion, translating into gross and net debt-to-equity ratios of 1.2x and 0.8x as at end-June 2024; this is expected to increase by about RM900 million from additional borrowings from its port subsidiaries to meet capex programmes. The rating agency notes that the port subsidiaries will fund their capex at subsidiary level and meet the financial obligations from their operating cash flow, thereby alleviating the need for funding support from the holding company.