Posted date: February 15, 2022
MARC Ratings has assigned a preliminary rating of AA-IS to MMC Port Holdings Sdn Bhd’s (MMC Port) proposed RM1.0 billion Sukuk Murabahah Programme. The rating carries a stable outlook.
The assigned rating is driven by MMC Port’s very strong competitive position among transhipment port operators regionally and among gateway port operators domestically, as well as its established track record in developing and operating container and conventional ports. A key moderating factor to the rating is MMC Port’s susceptibility to economic cycles, particularly trade flows that can weigh on port handling volumes.
MMC Port is the holding company of five domestic port operators: Pelabuhan Tanjung Pelepas Sdn Bhd (PTP), Northport (Malaysia) Bhd (Northport), Penang Port Sdn Bhd, Johor Port Berhad, and Pelabuhan Tanjung Bruas Sdn Bhd. The ports have long operating track records and generate healthy earnings, supported by continued investments in port infrastructure. For 1H2021, MMC Port recorded a higher combined container handling volume of 8.5 million twenty-foot equivalent units, resulting in higher revenue of RM1.8 billion (1H2020: RM1.5 billion). Operating margin rose to 34.5% in 1H2021 (1H2020: 28.2%).
Improved consolidated cash flow from operations of RM768.6 million in 1H2021 led to a stronger interest and debt coverage of 6.04x and 0.21x. Over the near term, MMC Port’s performance is expected to be supported by the growing seaborne trade, projected at about 4.0% p.a. For 2022-2023, the group has planned capex of about RM3.2 billion, largely for PTP and Northport, which is expected to be funded largely through internal funds of the ports.
Group consolidated borrowings stood at RM6.0 billion at end June-2021, of which RM1.1 billion is an outstanding term loan at the holding company that was taken in 2015 for the acquisition of the equity stake in NCB Holdings Bhd, the holding company of Northport. Proceeds from the proposed issuance will be used to refinance this term loan. Over the medium term, proceeds from an expected listing of MMC Port would strengthen its balance sheet, particularly its debt-to-equity ratio which stood at 1.27x at end-1H2021. While the current high gearing level reflects the capital-intensive nature of port operations, the port tariff structure provides support to the operating entities in generating healthy profit margins.