PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has affirmed its “AAA” rating on Petronas Dagangan Bhd’s (PDB) Islamic commercial papers (ICP) and Islamic medium-term notes (IMTN) programme of up to RM2 billion, with a stable outlook.
The rating agency said in a statement today that the ratings affirmation reflects PDB’s strong financial metrics, characterised by its sound liquidity and strong leverage position.
PDB’s ratings also incorporate high parental support from Petroliam Nasional Bhd (Petronas) on which MARC maintains a public information rating of “AAA” with a stable outlook.
The stable outlook on the ratings reflects MARC’s expectation that PDB will continue to maintain its current credit profile, it added.
PDB is a leading domestic player of downstream petroleum products, benefitting from an extensive network of more than 1,000 petrol stations across the country, with a strong market position, underpinned by well-established Petronas brand.
Its businesses are divided into four core segments, namely retail (mainly motor gasoline and diesel), commercial (mainly airline fuel), liquefied petroleum gas (LPG) and lubricants.
It retains a healthy market share in the retail and commercial segments, contributing about 50.7% and 49.3% to group revenue of RM22.2 billion for the nine month period of 2018 (9M2018).
The total group revenue rose by 9.4% year-on-year, largely due to higher average selling prices on higher Mean of Platts Singapore (MOPS) prices, the benchmark prices for refined products.
MARC noted that changes in pump prices have had no impact on PDB’s pricing mechanism as it adheres to the automated pricing mechanism under which it is assured of a fixed profit rate that affords earnings stability in the retail segment.
However, MARC said the operating performance of its commercial segment will continue to be susceptible to fluctuations in oil prices and economic cycles.
During 9M2018, PDB incurred higher capex of RM187.3 million, largely due to expenditure for the renovation and upgrading of petrol stations.
The lower cash flow from operations, higher capex and higher dividend payment of RM774.9 million resulted in negative free cash flow of RM484.1 million (9M2017: RM485.5 million).
Nevertheless, MARC noted that PDB has strong liquidity as reflected by cash balances of RM2.9 billion as at end-September 2018.
“The leverage level remained low with a debt-to-equity ratio of 0.01 times. There is currently no outstanding amount under the rated programme,” MARC added.
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PETALING JAYA: Malakoff Corp Bhd’s acquisition of Alam Flora is expected to improve its earnings by 4% in financial year ending Dec 31 (FY19) based on an earnings contribution of five months, according to AmInvestment Bank.
On a full-year basis, Alam Flora would increase Malakoff’s FY20 net profit by 10% and boost Malakoff’s fair value from 85 sen per share to about 94 sen a share, AmInvestment analyst Gan Huey Ling said in a note last Friday.
According to Gan, the research house will upgrade Malakoff’s FY19 earnings forecast if the RM944.6 million acquisition of 97.4% of Alam Flora from DRB-Hicom Bhd is completed by the third quarter of 2019 (Q3FY19).
Recently, Malakoff announced that the cut-off date for the fulfilment of the conditions for the acquisition has been extended to July 31.
“We have assumed Malakoff’s gross dividend per share to be 3.5 sen for FY18 and 4 sen for FY19. These translate into decent dividend yields of 4.2% for FY18 and 4.8% for FY19. Implied net dividend payouts are 93% for FY18 and 100% for FY19,” she added.
The research house maintained its “hold” recommendation on Malakoff with an unchanged discounted cash flow-based fair value of 85 sen per share. Its fair value of 85 sen per share implies an FY19 price earnings (PE) of 21.2 times and FY20 PE of 20.7 times.
Going forward, Malakoff has scheduled 100 days of maintenance shutdowns for the Tanjung Bin Energy (TBE) power plant in FY19.
As these are scheduled outages, Gan said the group will still receive capacity payments from Tenaga Nasional Bhd in FY19.
“We gather that there has not been any unplanned outage at the power plants in 4QFY18,” she said.
However, she said TBE power plant’s earnings may still be slightly affected as the rectification works for the voltage regulator, which started in early September, was only completed at the end of October 2018.
Recall that there were unplanned outages at the TBE power plant, GB3 power plant and KEV (Kapar Energy Ventures) power plant in Q3FY18.
Gan also noted that Malakoff is negotiating with General Electric, which is the main contractor, on the compensation for the unplanned outages at the TBE power plant.
She said the compensation would not be able to make up for the loss in capacity payments. However, Malakoff is hoping to extend the warranty period for the equipment and parts and/or receive compensation to cover the cost of repair or rectification works.
Previously, Malakoff’s target was to achieve the stipulated power purchase agreement threshold unplanned outage level of 6% by February 2019.
However, due to the numerous unplanned outages in Q3FY18, the timeline has been shifted to September 2019.
PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has affirmed its “AA” rating on ANIH Bhd’s RM2.5 billion Senior Sukuk Musharakah Programme with an outlook revision to “stable” from “negative” previously.
ANIH is the concessionaire of Kuala Lumpur-Karak Highway (KL-Karak) and Phase 1 of East Coast Expressway (ECE1) until 2032. Its toll concession for Kuala Lumpur-Seremban Expressway (KL-Seremban) ended on May 31, 2018.
MARC said in a statement today that the outlook revision to “stable” reflects the steady traffic growth on KL-Karak and ECE1 that would remain supportive of the company’s cash flow generation to meet the concessionaire’s finance service obligations.
The rating agency anticipates that ANIH will be in a better position than other similar toll concessionaires to weather any shifts in the prevailing regulatory environment for the domestic toll industry in the intermediate term.
“While the government recently announced compensation in lieu of deferred toll hikes in 2019, MARC views this as an interim measure,” it said.
It expects ANIH would continue to demonstrate a commendable liquidity profile by maintaining healthy cash balance levels. The rating also benefits from the subordinated and equity-like features of ANIH’s RM620 million junior bonds that allow it to withstand moderate operational underperformance.
However, MARC pointed out that the expiry of the KL-Seremban concession in May 2018 has had some impact on ANIH’s cash flows given that the toll contribution from this highway had averaged 10.4% of total tolling revenue for the past five years.
ANIH’s toll revenue rose 2.6% y-o-y to RM431.8 million for the financial year ended March 31, 2018 (FY2018) in line with overall traffic volume growth. However, due to the realisation of lower government compensation amounting to RM33.1 million vis-à-vis RM45.8 million in FY2017, overall revenue was lower.
For the first eight months of the financial year ending March 31, 2019, ANIH’s toll revenue declined 11.7% to RM294.2 million attributed to revenue losses arising from the expiry of the KL-Seremban concession.
The rating agency estimates that the revenue growth on KL-Karak Highway and ECE1 would make up for the lost revenue over the medium term.
Meanwhile, MARC said ANIH’s borrowings have reduced during the year, aided by debt repayment amounting to RM100 million in November 2018.
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