MARC Ratings has affirmed its rating of AA-_IS on Penang Port Sdn Bhd’s (PPSB) Islamic Medium-Term Notes Issuance Programme of up to RM1.0 billion. The outlook on the rating is stable.

PPSB’s position as the key trade gateway port in northern Peninsular Malaysia, handling both container and conventional cargo, as well as its ability to generate steady cash flows remain key rating drivers. Like its sister ports, Penang Port benefits from a long-term concession agreement that runs through March 2055, and the operational synergies derived from being part of MMC Port Holdings Berhad. Moderating factors include the impact on throughput volumes arising from a global trade slowdown, partly from geopolitical developments, and some degree of customer concentration that has weighed on handling volume.

For 5M2025, lower revenue was recorded at RM201.0 million, reflecting lower handling volumes in both container and conventional segments. Container throughput declined by 6.4% y-o-y to 568,288 twenty-foot equivalent units (TEUs), mainly due to weaker imports of automotive parts and exports of solar panels. Conventional cargo throughput contracted by 9.3% y-o-y to 2.3 million MT, weighed down by reduced exports of break bulk cargoes and imports of other commodities. Going forward, throughput volume is expected to remain flat for the whole of 2025, with the full impact of the US tariff imposition on trade movements remaining uncertain. Penang Port also saw a decline in its cruise operations following the departure of a key customer. Passenger volume reduced to 294,490 in 5M2025 (5M2024: 593,759). Passenger traffic is anticipated to improve with the commencement of a new service in 2H2025.

Despite lower revenue, improved efficiency has contributed to some protection in debt coverage measures. At RM77.7 million, operating profit before interest, tax, depreciation and amortisation (OPBITDA) interest coverage remained commensurate with the rating at 2.8x in 5M2025. Borrowings remained unchanged y-o-y at RM1.0 billion, comprising entirely the outstanding amount under the rated sukuk, with the first repayment of RM200 million falling due in December 2026. MARC Ratings understands that PPSB has planned a total of RM481 million in capex through 2028, mainly to enhance handling capacity and capabilities at both container and conventional cargo terminals, for which the port operator will utilise internal funds. The rating agency also understands that in view of balancing debt servicing and repayment requirements and meeting its capex aspirations, PPSB is proposing to temporarily lower the finance service cover ratio for FY2025 under the terms of the IMTN Programme.

While throughput volume uncertainties remain, PPSB’s earnings going forward will be supported by the government’s approval of a phased 30% tariff increase, comprising an initial 20% increase in November 2025 followed by a second phase commencing in November 2026. With handling volume expected to remain stable, the higher tariff would provide better debt coverage buffers going forward.