KUALA LUMPUR (May 12): Malaysian Rating Corp Bhd (MARC) has assigned a preliminary rating of AA_-IS for Pelabuhan Tanjung Pelepas Sdn Bhd (PTP)’s RM1.9 billion Islamic medium-term note (MTN) programme, with a stable outlook.

In a statement, MARC said the rating reflects PTP’s strong market position as a key transhipment port in the region, its ability to generate a strong cash flow and maintain healthy port performance.

“These factors provide a buffer against the expected sharp slowdown in global trade volume arising from the Covid-19 pandemic, which remains a key rating concern.

“The stable rating outlook is premised on MARC’s expectations that PTP would be able to recover from sudden disruptions to traffic volume and broadly maintain its cash flow metrics over the next 12 to 18 months,” the firm said.

PTP operates the Port of Tanjung Pelepas under a long-term concession expiring in 2055. The port is strategically located at the southern tip of the Strait of Malacca, along the Europe-Asia trading route.

PTP’s shareholders are MMC Corp Bhd (with a 70% stake) and Netherlands-based APM Terminals BV (30%). Both are major port operators, the main factor behind the substantial growth of PTP, said MARC.

It said PTP handled 9.1 million twenty-foot equivalent units (TEUs) in 2019, with a utilisation rate of 73%, while total volume handled grew at a compound annual growth rate (CAGR) of 4.2% over the last 10 years.

“Any decline in container handling volume from the expected slowdown in world merchandise trade would be partly offset by an increase in demand for storage facilities which will benefit PTP given its substantial storage facility,” MARC said.

PTP has earmarked RM1.7 billion for investments in port equipment and infrastructure over the next five years, MARC pointed out.

The proceeds from the proposed sukuk issuance will be used to refinance its existing government-guaranteed RM1.5 billion IMTNs maturing in September 2020 and other existing loans.

Meanwhile, according to the agency, PTP has high client concentration, given that Maersk and Mediterranean Shipping Company account for 84% of its container volume.

“This is substantially mitigated by the fact that Maersk is a shareholder of PTP while the port’s comprehensive facilities and operating efficiency alleviate concerns over Maersk shifting its operations,” it said.

For 2019, PTP recorded a 7.9% year-on-year increase in pre-tax profit, while revenue grew 2% to RM1.32 billion. The company has registered a positive cash flow for the past five years.