MARC Ratings has affirmed BEWG (M) Sdn Bhd’s (BEWG) RM400 million Sukuk Wakalah rating of AAIS with a stable outlook.
BEWG, a 100%-subsidiary of Hong Kong-based Beijing Enterprises Water Group Limited (BEWGL), was set up to undertake water and sewerage projects in Malaysia. In November 2015, it won the Terengganu state government’s contract to refurbish and upgrade water treatment and distribution facilities in Kemaman, Terengganu (Kemaman water project), for which the Sukuk Wakalah was raised.
BEWG received its Certificate of Practical Completion for the completion of the Kemaman water project from the Terengganu state government on November 24, 2021. Under the deferred-payment contract with the state government, BEWG was to receive six annual payments from the latter over 2021-2026. However, the payments have all been fully settled by the state government by August 29, 2022.
The rating benefits from a one-notch rating uplift on the credit strength of BEWGL, backed by a letter of undertaking issued by the parent and its demonstrated financial support to BEWG in the past, which we expect to continue to be forthcoming, if required.
Meanwhile, BEWG’s liquidity profile is strong. As of date, the company has around RM285.0 million in cash and cash equivalents, supported by the state government’s early payments. This is more than sufficient to cover the total outstanding sukuk of RM110.0 million. As of January 31, 2023, the Finance Service Reserve Account already contains a sufficient amount to cover the sukuk’s next principal and profit payments of RM83.8 million due on July 19, 2023, per the terms of the Sukuk Wakalah.