MARC Ratings has affirmed its AAAIS(s) rating on Projek Lebuhraya Usahasama Berhad’s (PLUS) RM25.2 billion Islamic Medium-Term Notes Programme (sukuk programme) with a stable outlook.
The rating incorporates a two-notch rating uplift from PLUS’ standalone rating and reflects the irrevocable and unconditional Letter of Undertaking (LoU) from the government that would cover any cash shortfall to maintain the LoU finance service cover ratio (FSCR) of 2.0x. For financial year ended December 31, 2023, LoU FSCR stood at 2.6x and is projected to remain comfortably above the covenanted 2.0x with minimum and average of 2.41x (FY2038) and 3.18x throughout the sukuk tenure.
PLUS’ close credit link to the government is further evidenced by the interdependence between the default events of the sukuk programme and its RM11.0 billion government-guaranteed sukuk, which is repayable only after the full redemption of the former.
PLUS’ standalone rating reflects its matured highway portfolio, characterised by a history of stable traffic and revenue performance. Traffic levels rose 7% y-o-y in 2023 and 4% y-o-y in 7M2024. PLUS has attributed the strong growth to pent-up demand following the pandemic, but expects growth to stabilise to the historical range of between 1.0% and 1.5% p.a. from 2025 onwards.
MARC Ratings notes PLUS’ ample liquidity, as reflected by cash and cash equivalents of RM3.9 billion as at end-July 2024, coupled with strong cash flow generation that averaged RM2.1 billion p.a. over the past four years, provide the toll concessionaire with strong capacity to meet projected capex and financial obligations over the next 12 months. In the event of traffic underperformance over the longer term, MARC Ratings believes PLUS has flexibility to adjust its capex plan — as has been demonstrated in the past — to support its credit metrics. There is also flexibility to spread the repayment schedule, all currently assumed to be within and up to 2052, up to the programme’s final maturity date in 2058.