MARC Ratings has affirmed its AAAIS /MARC-1IS ratings on Gas Malaysia Distribution Sdn Bhd’s (GMD) Islamic Medium-Term Notes (IMTN)/ Islamic Commercial Papers (ICP) Programmes with a combined limit of up to RM1.0 billion. The rating outlook is stable. As at end-June 2026, the amounts outstanding under the IMTN/ICP programmes stood at RM530.0 million and RM210.0 million.
The ratings reflect GMD’s strong market position as the sole owner and operator of the Natural Gas Distribution System (NGDS) in Peninsular Malaysia. Its monopoly position supports stable and predictable cash flows, while the Incentive-Based Regulation (IBR) framework provides revenue visibility through the recovery of the approved Annual Revenue Requirement (ARR) via formula-based tariff adjustments.
In 2025, GMD incurred an under-recovery of RM155.1 million, as its tolling fee income of RM395.3 million fell short of the approved ARR of RM550.4 million. The IBR framework mitigates this shortfall by allowing recovery of 75% of the amount (RM116.3 million) through tariff adjustments.
Despite its lower tolling fee income, GMD’s revenue rose to RM513.1 million in 2025 from RM490.9 million in 2024, driven by higher IBR-related revenue adjustments of RM116.3 million (2024: RM78.8 million). Together with a largely stable direct cost base, this improved its operating margin to 51.4% from 48.6%, keeping it close to its historical average of about 53% and demonstrating the resilience of its regulated revenue framework.
GMD expects its tolling fee income to remain below the approved ARR in 2026, reflecting weaker firm capacity reservations, particularly from rubber industry customers amid uncertain global trade conditions. However, the impact is mitigated by the IBR framework, under which any under-recovery is expected to be recovered through distribution tariff surcharges in Regulatory Period 3 (RP3).
GMD incurred RM380.9 million in regulated capex in 2025, raising cumulative RP2 regulated capex to RM870.4 million, including RP1 spillovers. On an NGDS-only basis, RP2 capex amounted to RM654.0 million against the approved RM782.0 million, with part of the remaining expenditure expected to spill over into RP3. For RP3 (2026–2028), GMD plans to invest about RM800.0 million in regulated capex, of which 80%–90% is expected to be allocated to NGDS projects. Key initiatives include expanding the pipeline network by 350km to 400km and undertaking pipeline looping works to improve network connectivity, strengthen system resilience, and mitigate the risk of major supply disruptions.
GMD’s leverage remained moderate as at end-2025, with a debt-to-equity (DE) ratio of 0.47x and borrowings of RM635.5 million following a RM250.0 million IMTN drawdown in July 2025. The DE ratio is projected to increase modestly to about 0.50x in 2026 to fund RP3 capex. To maintain funding flexibility for RP3 and future regulatory periods, GMD intends to upsize its RM1.0 billion IMTN programme. Utilisation of the expanded programme is expected to commence in late-2027 or 2028, with the DE ratio projected to reach around 0.70x by the end of RP3.