MARC Affirms its Rating of AA-IS on MMC Corporation's Rm1.5 Billion Sukuk Murabahah Programme

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1. IB Press Release Service Published on :​ ​IslamicBanker.com Publications: ​https://www.islamicmarkets.com/publications MARC Affirms its Rating of AA-IS on MMC Corporation's Rm1.5 Billion Sukuk Murabahah Programme 25 January 2018 MARC has affirmed its rating of AA-IS on MMC Corporation Berhad's (MMC) RM1.5 billion Sukuk Murabahah Programme (Sukuk Murabahah) with a stable outlook. The rating affirmation reflects MMC's strong competitive position in port operations, engineering and construction, as well as power generation. The affirmed rating is also supported by long-term concessions for its ports and power operations and by sizeable government-related infrastructure contracts for its engineering and construction division that underpin the group's financial performance. The group's consolidated leverage position, which could weaken given the ongoing capex programme for its port operations, remains a key moderating factor. Additionally, the increasingly competitive environment for port operators and the susceptibility of ports' performance to world trade are other moderating factors. MMC is the largest domestic port operator in terms of container handling; for 2016, it handled a combined 13.5 million TEUs, which amounted to 49.6% of total domestic container throughput in the year. Its ports, which are located along the strategic Straits of Malacca, include Pelabuhan Tanjung Pelepas (PTP) and Johor Port in Johor, Northport in Port Klang and Penang Port in Penang. MARC notes that the group has continued to invest in its ports to increase their handling capacities and to improve operating efficiencies. It has earmarked about RM1.3 billion over the near term, of which about RM600 million will be utilised by PTP. The capex requirement is expected to be funded by its respective subsidiaries' internal cash and by bank borrowings which could increase group leverage to over 0.90 times. For 9M2017, the group's consolidated revenue increased by 5.4% y-o-y to RM2.9 billion, mainly driven by the work progress on the Klang Valley Mass Rapit Transit Sungai Buloh Serdang Putrajaya Line (KVMRT-SSP Line) and Langat Sewerage Treatment Project as well as from the increase in volume handled by PTP and Johor Port. The group's pre-tax profit was, however, lower at RM266.7 million (9M2016: RM367.8 million), largely due to a one-off SMART tunnel impairment charge of RM98.0 million due to lower traffic projections. Excluding the impairment charge, pre-tax profit would have been higher at RM364.7 million. Among its divisions, the group's ports & logistics operations remained the key contributor with its pre-tax profit growing 4.4% y-o-y to RM369.1 million during the period. Its other key contributor, the engineering and construction division, continues to benefit from the ongoing large domestic infrastructure projects; as at end-September 2017, the group's order book of RM17.6 billion will provide strong
2. IB Press Release Service Published on :​ ​IslamicBanker.com Publications: ​https://www.islamicmarkets.com/publications earnings visibility through 2022. The bulk of its outstanding order book relates to the underground work packages worth RM7.2 billion and its Project Delivery Partner (PDP) role totalling RM6.2 billion for the KVMRT-SSP Line project through the equal joint-venture company MMC-Gamuda. At the holding company level, MMC's revenue comprised dividend income and construction revenue, mainly from its KVMRT underground work packages in 2016. Historically, dividends from its ports and logistics, and energy and utilities divisions have been sufficient to meet the holding company's finance service obligations. On including earnings from construction operations, the holding company generated cash flow from operations (CFO) of RM353.3 million in, which translates into CFO interest cover of 2.02 times (2015: 1.94 times) in 2016. MMC's consolidated group borrowings stood at RM9.0 billion as at end-9M2017; the group's borrowings, which mainly reside in the holding company and its intermediate holding company, MMC Port Holdings Sdn Bhd, rose in part to fund the acquisition of NCB Holdings and Penang Port of about RM2.0 billion. While MMC has fully issued the RM1.5 billion sukuk under the rated programme, it has strong financial flexibility in the form of ownership of approximately 5,000 acres of land, and unencumbered cash balance of about RM706 million as at end-9M2017, in addition to approximately RM2.5 billion in unutilised credit lines. Proceeds from land disposals and/or additional bank borrowings can be utilised to address its financial obligations. The stable outlook factors in the dividend-paying ability of MMC's key subsidiaries and associates, and the group's moderate liquidity position to service its financial obligations. Any significant increase in its leverage position and weakening in its interest cover measures could result in downward rating pressure. Organisation Name: News Type: Malaysian Rating Corporation Berhad (MARC) RATING ANNOUNCEMENT Source: BNM Announcements Media Contact Saifuruddin Othman +603-2717 2945 / saifuruddin@marc.com.my Taufiq Kamal, +603-2717 2951 / taufiq@marc.com.my.
3. IB Press Release Service Published on :​ ​IslamicBanker.com Publications: ​https://www.islamicmarkets.com/publications Disclaimer: This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.