MARC affirms ‘AA+’ on Westports
KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed its “AA+” rating on Westports Malaysia Sdn Bhd’s RM2 billion sukuk musyarakah programme with a “stable” outlook on port operator’s solid position and stable profit.
MARC said Westports’ strong position as a key port operator in the region, consistently high and stable profit margin as well as strong financial service coverage continued to be key rating drivers.
“Moderating the rating is increasing competitive pressure arising from the evolving shipping industry landscape, high client concentration risk and likelihood of negative impact on leverage position from port capacity expansion.
“The stable outlook reflects MARC’s expectations that Westports would be able to weather the challenging shipping industry landscape while maintaining its operational and financial metrics at current levels.
“Downward pressure on the rating may occur if there is a cash flow generation mismatch to meet its financial obligations and/or if leverage metrics result in the cash flow from operation’s debt coverage falling below 0.5 times, debt-to-OPBITDA (operation before interest, tax, depreciation and amortisation) rising above 2.5 times and/or debt-toequity rising above 0.7 times,” it said in a statement.
“Westports has continued to make significant investments in recent years to upgrade its port operations with the current total container terminal handling capacity increasing to 14 million twenty-foot equivalent units (TEUs) following the completion of CT8 and CT9 last year.
“Its competitive position is supported by its draft limit of 17.5m and the use of the latest 52m quay cranes that can accommodate ultra-large container ships with capacities of 20,000 TEUs,” it added.
As at end of last year, however, terminal utilisation rate declined to 64.5 per cent against the available terminal capacity, compared with 82.9 per cent against 12 million TEUs terminal capacity in the preceding year.
The decline was mainly due to a 9.3 per cent contraction in its throughput container volume following the realignment of selected services by Westports’ two largest clients, namely CMA CGM of Ocean Alliance and United Arab Shipping Co of THE Alliance, to Singapore.
CMA CGM remained Westports’ largest client, despite its total TEUs dropping about 34.2 per cent to 2.2 million TEUs, from 3.3 million TEUs in 2016.