RAM Ratings Reaffirms AA2/Stable Rating of Kesas' Sukuk

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1. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications RAM​ ​Ratings​ ​Reaffirms​ ​AA2/Stable​ ​Rating​ ​of Kesas'​ ​Sukuk 27​ ​October​ ​2017 RAM​ ​Ratings​ ​has​ ​reaffirmed​ ​the​ ​AA2/Stable​ ​ratings​ ​of​ ​Kesas​ ​Sdn​ ​Bhd's​ ​(the​ ​Company)​ ​RM735 million​ ​Sukuk​ ​Musharakah​ ​IMTN​ ​(2014/2023).​ ​The​ ​reaffirmation​ ​of​ ​the​ ​rating​ ​is​ ​based​ ​on​ ​our expectation​ ​that​ ​the​ ​Company​ ​will​ ​maintain​ ​its​ ​strong​ ​debt-servicing​ ​aptitude,​ ​underpinned​ ​by the​ ​Shah​ ​Alam​ ​Expressway's​ ​(the​ ​SAE​ ​or​ ​the​ ​Expressway)​ ​mature​ ​traffic​ ​profile. While​ ​the​ ​SAE​ ​benefits​ ​from​ ​its​ ​strategic​ ​alignment​ ​that​ ​straddles​ ​densely​ ​populated​ ​areas,​ ​the Expressway​ ​has​ ​been​ ​experiencing​ ​a​ ​stronger-than-expected​ ​wave​ ​of​ ​commuter​ ​migration​ ​to public​ ​transportation.​ ​This​ ​follows​ ​the​ ​commencement​ ​of​ ​the​ ​LRT​ ​extensions,​ ​compounded​ ​by the​ ​availability​ ​of​ ​alternatives,​ ​including​ ​toll-free​ ​routes.​ ​The​ ​SAE's​ ​average​ ​daily​ ​traffic​ ​(ADT) was​ ​unchanged​ ​at​ ​341,148​ ​vehicles​ ​in​ ​FY​ ​Jul​ ​2017​ ​(FY​ ​Jul​ ​2016:​ ​341,179​ ​vehicles).​ ​We​ ​expect its​ ​ADT​ ​to​ ​remain​ ​healthy​ ​throughout​ ​the​ ​tenure​ ​of​ ​the​ ​Sukuk,​ ​although​ ​we​ ​remain​ ​cognisant​ ​of the​ ​longer-term​ ​impact​ ​from​ ​its​ ​2​ ​scheduled​ ​toll-rate​ ​hikes​ ​(+25%​ ​to​ ​RM2.50​ ​in​ ​2018​ ​and​ ​+20% to​ ​RM3.00​ ​in​ ​2021)​ ​and​ ​the​ ​concurrent​ ​development​ ​of​ ​alternative​ ​routes​ ​as​ ​well​ ​as​ ​public transportation.​ ​The​ ​Expressway's​ ​ADT​ ​is​ ​projected​ ​to​ ​average​ ​242,000​ ​vehicles​ ​throughout​ ​the tenure​ ​of​ ​the​ ​Sukuk​ ​(base​ ​case:​ ​395,000​ ​vehicles). Based​ ​on​ ​our​ ​sensitivities,​ ​the​ ​Company​ ​is​ ​expected​ ​to​ ​achieve​ ​a​ ​healthy​ ​average​ ​annual pre-financing​ ​cashflow​ ​of​ ​RM167​ ​million.​ ​This​ ​translates​ ​into​ ​a​ ​strong​ ​minimum​ ​finance​ ​service coverage​ ​ratio​ ​(FSCR)​ ​(without​ ​cash​ ​balances)​ ​of​ ​1.16​ ​times​ ​and​ ​FSCR​ ​(with​ ​cash​ ​balances, post-distribution)​ ​of​ ​2.25​ ​times​ ​throughout​ ​the​ ​remaining​ ​tenure​ ​of​ ​the​ ​Sukuk.​ ​We​ ​have assumed​ ​that​ ​the​ ​Company​ ​will​ ​adhere​ ​to​ ​its​ ​financial​ ​covenants​ ​throughout​ ​the​ ​tenure​ ​of​ ​the Sukuk​ ​(i.e.​ ​on​ ​a​ ​forward-looking​ ​basis,​ ​as​ ​opposed​ ​to​ ​only​ ​in​ ​the​ ​year​ ​of​ ​assessment).​ ​As​ ​with most​ ​concession-related​ ​projects,​ ​Kesas​ ​is​ ​inherently​ ​exposed​ ​to​ ​regulatory​ ​and​ ​single-project risks. Organisation​ ​Name: News​ ​Type: Source: RAM​ ​Rating​ ​Services​ ​Berhad RATING​ ​ANNOUNCEMENT BNM​ ​Announcements
2. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications Media​ ​Contact Padthma​ ​Subbiah (603)​ ​7628​ ​1162 padthma@ram.com.my Disclaimer: The​ ​credit​ ​rating​ ​is​ ​not​ ​a​ ​recommendation​ ​to​ ​purchase,​ ​sell​ ​or​ ​hold​ ​a security,​ ​inasmuch​ ​as​ ​it​ ​does​ ​not​ ​comment​ ​on​ ​the​ ​security's​ ​market price​ ​or​ ​its​ ​suitability​ ​for​ ​a​ ​particular​ ​investor,​ ​nor​ ​does​ ​it​ ​involve​ ​any audit​ ​by​ ​RAM​ ​Ratings.​ ​The​ ​credit​ ​rating​ ​also​ ​does​ ​not​ ​reflect​ ​the legality​ ​and​ ​enforceability​ ​of​ ​financial​ ​obligations. RAM​ ​Ratings​ ​receives​ ​compensation​ ​for​ ​its​ ​rating​ ​services,​ ​normally paid​ ​by​ ​the​ ​issuers​ ​of​ ​such​ ​securities​ ​or​ ​the​ ​rated​ ​entity,​ ​and sometimes​ ​third​ ​parties​ ​participating​ ​in​ ​marketing​ ​the​ ​securities, insurers,​ ​guarantors,​ ​other​ ​obligors,​ ​underwriters,​ ​etc.​ ​The​ ​receipt​ ​of this​ ​compensation​ ​has​ ​no​ ​influence​ ​on​ ​RAM​ ​Ratings'​ ​credit​ ​opinions or​ ​other​ ​analytical​ ​processes.​ ​In​ ​all​ ​instances,​ ​RAM​ ​Ratings​ ​is committed​ ​to​ ​preserving​ ​the​ ​objectivity,​ ​integrity​ ​and​ ​independence​ ​of its​ ​ratings.​ ​Rating​ ​fees​ ​are​ ​communicated​ ​to​ ​clients​ ​prior​ ​to​ ​the issuance​ ​of​ ​rating​ ​opinions.​ ​While​ ​RAM​ ​Ratings​ ​reserves​ ​the​ ​right​ ​to disseminate​ ​the​ ​ratings,​ ​it​ ​receives​ ​no​ ​payment​ ​for​ ​doing​ ​so,​ ​except for​ ​subscriptions​ ​to​ ​its​ ​publications. Similarly,​ ​the​ ​disclaimers​ ​above​ ​also​ ​apply​ ​to​ ​RAM​ ​Ratings' credit-related​ ​analysis​ ​and​ ​commentaries,​ ​where​ ​relevant.