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) solid 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.
Between June 2022 and June 2023, EDOTCO Malaysia group added 36 towers and 1,032 tenancies that increased the total to 6,117 towers and 14,061 tenancies as at end-June 2023 (end-June 2022: 6,081 towers and 13,029 tenancies). Its tenancy ratio improved to 2.3x by end-1H2023 (end-1H2022: 2.1x) on additional tenants. It now holds a stronger 22% market share of the domestic tower company market, from 19% a year ago. MARC Ratings believes that, as the market leader, EDOTCO Malaysia group is well-positioned to capitalise on the rising demand for data and the rollout of the country’s 5G services.
EDOTCO Malaysia group’s liquidity profile is characterised by strong cash flow from operations (CFO) exceeding RM400 million a year and is projected to remain at least at this level through 2027. As such, CFO will be sufficient to cover capex (projected to range from RM53 million to RM97 million a year) and shareholder returns (RM160 million to RM200 million a year) over the next five years.
EDOTCO Malaysia group’s debt-to-equity ratio improved to 1.4x as at end-June 2023 following the settlement of most of its short-term borrowings in 2022 and an increase in 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 further leverage improvement.