MARC Ratings has affirmed its AAAIS rating on Amanat Lebuhraya Rakyat Berhad’s (ALR) RM5.5 billion sukuk programme, with a stable outlook.
The rating reflects the strong cash flow generation capacity of ALR’s portfolio of matured highways in the Klang Valley, its strong debt service ability, and the low capital requirement for operations and maintenance (O&M) of the highways. A no-dividend policy as per the terms of the transaction reinforces ALR’s liquidity position that would afford ALR the ability to early redeem the sukuk by exercising the call option on the first call date in FY2034. The rating is mainly moderated by the risk associated with traffic performance, although the rating agency draws comfort from the historically stable and mature traffic profile of the key highways in the portfolio.
ALR’s road network comprises Shah Alam Expressway (KESAS), Lebuhraya Damansara-Puchong (LDP), The Western Kuala Lumpur Traffic Dispersal Scheme (SPRINT) and the Stormwater Management and Road Tunnel (SMART). KESAS, LDP and SPRINT collectively account for about 97% of ALR’s consolidated revenue for financial year ended March 31, 2023 (FY2023). Traffic levels on the three roads have proven to be relatively stable, with a moderate peak-to-trough of about 11% during 2015-2023 (excluding periods impacted by the pandemic). SMART’s peak-to-trough over the same period is greater at around 34%. However, its impact on ALR’s financial metrics is not expected to be significant as it accounted for only about 3% of the top line.
The toll roads are strategically located in densely populated urban areas, with traffic predominantly made up of the more stable commuter base, i.e. light vehicles (more than 90%). The four highways combined have recorded a 20-year traffic compound annual growth rate (CAGR) of 5.7%, reflecting their steady underlying traffic base. Overall, post-pandemic traffic recovery has been swift. Collectively, the annual average daily traffic had recovered in FY2023 (April 2022 – March 2023) and 1QFY2024 (April 2023 – June 2023) to 97% (933,300 vehicles) and 100% (967,500 vehicles), relative to 2019 levels.
The rating agency views operational risk to be low considering the relatively straightforward nature of the highways’ O&M and draws comfort that the O&M continues to be performed by the concession companies, supported by the experienced senior management team from Gamuda Berhad. Total borrowings of RM5.5 billion as at end-June 2023 comprised entirely of the sukuk. ALR’s liquidity position also benefits from the sukuk’s protective structural features, including a complete lock-up of operating cash and restrictions on dividends. While the build-up of cash would allow for early redemption of the sukuk, the excess cash provides a strong buffer to meet exigencies in scenarios of traffic underperformance. The rating case projects the finance service coverage ratio (FSCR) profile to remain strong, comfortably meeting the FSCR covenant of 1.5x throughout the sukuk tenure.