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 RM330.0 million.
The rating reflects the resilient traffic on the mature, 23-year-old Cheras-Kajang Highway and its stable cash flow generation. Cerah Sama’s strong liquidity position and accommodative sukuk repayment structure further support the rating. Moderating the rating is the company’s leveraged capital structure, in part due to its generous dividend distribution.
Traffic volume has recovered strongly to the pre-pandemic level, with the average daily traffic at 146,066 vehicles through 10M2022 already reaching 98%-99% of the 2019 level. We expect normalised traffic patterns, and Cerah Sama to maintain a broadly stable financial performance going forward. Liquidity remains relatively strong; we estimate cash reserves in the RM70 million to RM80 million range by end-2022, adequate to cover the sukuk’s RM30.0 million principal repayment due on January 31, 2023.
Cerah Sama’s leverage remains relatively high, although this has recently been managed down to 2.9x at end-June 2022 (end-2021: 3.1x; end-2020: 4.1x). We expect Cerah Sama to prudently distribute dividends to not compromise its liquidity and leverage metrics and maintain its finance service cover ratio at a minimum of 1.75x.