MARC Ratings has affirmed its rating on port operator Pelabuhan Tanjung Pelepas Sdn Bhd’s (PTP) RM2.15 billion Islamic Medium-Term Notes (Sukuk Murabahah Programme) at AAIS. The rating outlook is stable.
The rating affirmation is driven by PTP’s strong position as the operator of a key container transhipment port in the region that has benefitted from continued investments and the expertise of its key shareholders which, in turn, have led to a steady increase in the port’s capacity and operational efficiency. The rating is also underpinned by PTP’s strong liquidity position and healthy cash flow generation that remain supportive of debt servicing and port expansion. The key moderating factor to the rating is the susceptibility of the port handling volume to global trade which, in turn, is highly reactive to major geopolitical events.
PTP’s shareholders, MMC Port Holdings Sdn Bhd (MMC Port) (70%), and Netherlands-based APM Terminals B.V. (30%), have lengthy and proven track records in port development and operations. MMC Port owns several key port operators in Malaysia while APM Terminals, which is owned by A.P. Moller-Maersk A/S (Maersk), has interests in more than 60 ports globally. Maersk, one of the world’s largest container liners, is PTP’s key customer and has contributed to about 70% of PTP’s throughput volume over the last five years.
MARC Ratings notes that from February 2025, Maersk and Hamburg-based Hapag-Lloyd AG will jointly operate a hub-and-spoke model, connecting gateway ports with 12 key transhipment hubs globally which are majority owned and/or controlled by Maersk or Hapag-Lloyd. The operation, dubbed “Gemini Cooperation”, which will commence after the dissolution of the 2M alliance between Maersk and Mediterranean Shipping Company S.A. in January 2025, would substantially lift PTP’s throughput volume through increased connection of shuttle to mainline services given the port’s position as a key hub under the hub-and-spoke model. The combined throughput volume from Maersk and Hapag-Lloyd is expected to account for 80% of PTP’s capacity over the medium term.
To accommodate the growth, PTP is undertaking a capacity expansion costing RM4.8 billion through 2028 involving mainly the purchase of new cranes, expansion of yard and construction of a new berth. By 2028, the handling capacity is projected to increase to around 16 million twenty-foot equivalent units (TEU) from the current 13.5 million TEUs. The capex is expected to be largely funded internally and, to a lesser extent, by borrowings. Given that PTP maintains a strong liquidity position, which stood at RM908.5 million as at end-2023, that would be supported by cash flow generation, MARC Ratings views that the port operator has the wherewithal to support the expansion. Borrowings are projected to increase by RM1.2 billion to RM3.5 billion by end-2026 (end-2023: RM2.3 billion) which would result in the gross debt-to-equity ratio to peak around 1.1x in 2025 before declining to 0.9x by 2028.
PTP would be able to maintain its strong cash flow coverage metrics despite the increase in debt, on the premise of an increase in cash flow from operations (CFO) to about RM1.0 billion in 2025, reaching RM1.4 billion in 2028. CFO to interest and debt coverages are projected to be above 6.0x and 0.3x over the period. Under a sensitivity analysis in which CFO is projected to remain at the 2023 level of RM721.2 million and including the additional borrowings, CFO interest and debt coverage ratios would remain above 4.0x and 0.2x through 2028.
The outstanding notes under the rated Sukuk Murabahah Programme stood at RM2.095 billion, of which RM270 million notes will mature in June 2025 and RM295 million in August 2025. These are expected to be partly refinanced from the new borrowings.