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12 Jan | Friday
RAM Ratings reaffirms AA1(s)/Stable rating of Samalaju’s sukuk

RAM Ratings has reaffirmed the AA1(s)/Stable rating of Samalaju Industrial Port Sdn Bhd’s (Samalaju or the Company) Sukuk Murabahah programme of up to RM950 million (2015/2036) (the Sukuk). The rating is premised on an unconditional and irrevocable corporate guarantee extended by Bintulu Port Holdings Berhad (BPHB, rated AA1/Stable/P1). BPHB is the parent of Samalaju.

Samalaju Port (the Port) plays an important role as a dedicated port and logistical hub for tenants of Samalaju Industrial Park (the Park), which is part of the broader Sarawak Corridor of Renewable Energy (SCORE). Upon commencement of operations at Phase 1 of Samalaju Port on 6 June 2017, the Port had seen a gradual build-up in cargo throughput, with 1.67 million tonnes handled in the first nine months of 2017, compared to 0.45 million tonnes during the Port’s interim phase in 2016. Demand at the Port is currently driven by 4 customers – due to slower-than-expected take-up at the Park, the Port’s full-year utilisation rate is forecasted to come up to only 12% in 2017 (based on maximum handling capacity of 18 million tonnes), lower than our previous expectations.

Samalaju’s performance remains susceptible to global economic conditions, delays in plant-ups, the downsizing of production and the financial performance of customers. As such, we expect the Company’s debt-servicing capability to stay weak in the near term, with average projected funds from operations (FFODC) of 0.05 times (base case: 0.10 times). Its gearing ratio is projected to peak at 3.77 times over the next 5 years (base case: 2.08 times).

The construction of Samalaju Port was completed on time and within budget. Despite some delay in completion of the capital dredging works, it does not disrupt operations of the Port and the works had been concluded on 31 December 2017. Samalaju is estimated to incur cumulative project costs of RM1.76 billion for Phase 1, which is within the budget of RM1.9 billion.

In view of BPHB’s solid relationship with the Government of Malaysia – given the latter’s shareholdings in BPHB through various government agencies, the Sarawak Government and Petroliam Nasional Berhad – the federal and state governments are seen as having an incentive to provide the Company with financial assistance. This would facilitate the success of SCORE while ensuring Samalaju meets its financial and operational obligations. We believe the Company will continue to derive financial flexibility from BPHB and both the federal and state governments.

Analytical contact
Nurhayati Sulaiman
(603) 7628 1040
yati@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

Date of release: 12 January 2018

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 analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2018 by RAM Rating Services Berhad’s

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