Friday, November 4, 2011

RAM Ratings reaffirms Berjaya Infra's RM400m debt notes

KUALA LUMPUR (Nov 4): RAM Rating Services Bhd has reaffirmed the AA3 rating of Berjaya Infrastructure Sdn Bhd RM400 million medium-term notes (MTN) programme (2008/2028), with a stable outlook.

The rating agency said on Friday that as at end-August 2011, Berjaya Infrastructure's outstanding debt notes were RM55 million.

Berjaya Infrastructure's subsidiaries are involved in the operation, maintenance and management of water-treatment plants as well as the supply of treated water.

RAM Ratings said Berjaya Infrastructure has an extensive track record of almost two decades in water-treatment services in Malaysia. Its strong business profile is supported by its stable and predictable concession-driven cashflow. Its commendable operations have translated into robust financial metrics.

'Under a stressed-case scenario, the Group is projected to generate an average operating cashflow (OCF) of RM18.7 million per annum throughout the tenures of the MTN issues, which translates into a minimum OCF debt-coverage ratio of 0.36 times (fiscal 2011-2016). As at end-May 2011, its balance sheet remained healthy with a gearing ratio of 0.49 times,' it said.

The ratings agency said the collections of Air Utara Indah Sdn Bhd (AUI) have improved since the resumption of payments from Syarikat Air Darul Aman (SADA) in early 2011.

It added AUI's receivables cycle is expected to recover to about the same levels before the formation of SADA, albeit still lengthier than the credit period permitted by its privatisation agreement.

'We highlight that any significant deterioration in AUI's collections beyond the parameters of our sensitivity tests would weaken its liquidity profile and, ultimately, the rating of the MTN Programme. Our cashflow analysis assumes a nine-month delay in payments from SADA,' it said.

In mid-2011, Berjaya Infrastructure acquired a 100%-stake in IDS TECHNOLOGY [] Sdn Bhd for RM10.86 million from a related company.

RAM Ratings said this acquisition contrasted against the group's past acquisitions that had only focused on water-related assets.

'RAM Ratings will have to assess the impact on the credit profile of the MTN Programme if Berjaya Infrastructure's future investments are financed by additional borrowings or are not supported by adequate returns to maintain its debt-servicing ability, or if the group makes substantial investments in non-water-related assets that will alter its overall business risk profile,' it said.

On a related note, the ratings agency said there has not been much progress in the restructuring of the domestic water industry.

Although Berjaya Infrastructure's local units have been permitted to retain their water-treatment services in accordance with their respective concession agreements, an official announcement from the authorities would be essential towards determining the final outcome.

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