MARC Ratings has affirmed its AA-_IS rating on Cerah Sama Sdn Bhd’s RM420.0 million Sukuk with a stable outlook. The outstanding currently stands at RM270.0 million.

The rating affirmation reflects the traffic resilience on Cerah Sama’s mature Cheras-Kajang Highway and the company’s stable cash flow generation. The rating also reflects Cerah Sama’s strong liquidity position and accommodative sukuk repayment structure. This, however, is tempered by the company’s moderately high, albeit improving, financial leverage.

In the first 10 months of 2024 (10M2024), average daily traffic (ADT) reached 164,280 vehicles, which represented a 4.4% growth from the corresponding period in 2023, and an 11% increase over the level observed during pre-pandemic 2019. At the current ADT, MARC Ratings projects toll revenue (before compensation) to grow around 4% y-o-y to about RM78 million in 2024, following a 5.4% increase in 2023.

Liquidity is adequate, with cash and cash equivalents of about RM66.8 million as at end-June 2024, to cover upcoming sukuk repayment of RM40.0 million due on January 31, 2025. Leverage remained relatively high at 1.5x as at end-June 2024 but has been trending downward since 2021 (3.1x). The concession agreement provides for a toll rate increase from 2025. In view of this, together with the steady traffic volume and scheduled debt amortisation, MARC Ratings expects leverage to continue improving going forward.

Cerah Sama projects an average post-distribution finance service cover ratio (FSCR) of 2.4x, with a minimum of 2.0x between 2025 and 2029. Cerah Sama has, in MARC Ratings’ view, balance-sheet flexibility — specifically through the curtailment of dividends — in case traffic performance is weaker and/or receipt of toll compensation (in lieu of rate hikes) takes longer than expected to meet the FSCR covenant of 1.75x. In this regard, MARC Ratings continues to expect Cerah Sama to maintain a prudent dividend approach and protect its credit metrics.