MARC Ratings has affirmed its AA+_IS rating on EDOTCO Malaysia Sdn Bhd’s RM3.0 billion Islamic Medium-Term Notes Programme (Sukuk Wakalah Programme) with a stable outlook.

The rating reflects EDOTCO Malaysia and its subsidiaries’ (EDOTCO Malaysia group) leading market position in the growing domestic telecommunication (telco) tower industry, the underlying stability of its business model that provides strong cash flow visibility, and the low operational and counterparty risks.

EDOTCO Malaysia group remains the largest tower company (towerco) in Malaysia with 21% share of the market by tower count. As at end-March 2024, the towerco held 6,179 towers and 14,469 tenancies. Consequently, its tenancy ratio improved to 2.34x as at end-March 2024 (end-March 2023: 2.26x) on the back of additional tenants. The rating agency believes that EDOTCO Malaysia group, as the market leader, is well-positioned to capitalise on expected market growth, underpinned by rising demand for data and the rollout of the country’s 5G network.

EDOTCO Malaysia group’s sizeable cash flow from operations (CFO) of more than RM400 million a year underlines its strong liquidity profile. With an average projected CFO of about RM660 million p.a. through 2027, the group has sufficient buffer to fund capex, projected between RM70 million and RM170 million a year, as well as provide shareholder returns, forecast between RM120 million and RM210 million p.a.

EDOTCO Malaysia group’s debt-to-equity ratio improved to 1.3x as at end-March 2024 on lower borrowings and higher equity base. Borrowings are expected to decline further over the medium term with scheduled repayments of its sukuk of RM100 million in 2025 and RM600 million in 2027. Overall, MARC Ratings views EDOTCO Malaysia group’s strong cash-generative business model to support improvement in its leverage position.