RAM Reaffirms Bintulu Port AA1 Rating

RAM Ratings has reaffirmed the AA1(s)/Stable rating of Samalaju Industrial Port Sdn Bhd’s (Sukuk Murabahah Programme) of up to RM950 million.

According to RAM, Samalaju Port plays an important role as a dedicated port and logistical hub for tenants of Samalaju Industrial Park, which forms part of the Sarawak Corridor of Renewable Energy. Subsequent to Phase 1 of Samalaju Port becoming operational in 2017, the port has seen promising growth in throughput volumes handled over the years. In 2020, the cargo volume declined 4.7% to come in at 4.71 mil tonnes.

In 1H 2021, cargo volume surged 18.8% y-o-y to 2.67 mil tonnes, lifted by the conversion of aluminum and manganese exports from container to bulk cargo and the commencement of operations at Press Metal Bintulu Sdn Bhd’s Phase 3 plant. The full-year cargo volume handled is expected to reach 5.04 mil tonnes, backed by expansions
undertaken by existing and new customers at the Park.

Stripping off revenue from construction services, Samalaju’s top line slipped 2.6% yo-y to RM111.71 mil in FY Dec 2020, in line with lower cargo demand from customers during the pandemic. The Company continues to incur a pre-tax loss on account of elevated depreciation, amortisation and finance costs since the completion of the Port. The Company’s weak profitability has translated into subdued leverage and cashflow-debt-coverage ratios. Over the next five years, RAM expects its adjusted funds from operations debt coverage ratio to remain weak at an average 0.05 times while adjusted gearing will peak at 3.66 times. With cash reserves of RM 356.47 million, Samalaju’s liquidity position is healthy and amply able to cover short-term lease obligations and profit repayments of RM39.46 mil due in the next 12 months.

The group is subject to customer concentration risk as its business hinges solely on the Park’s tenants. Demand at the port is currently spurred by six customers, any severe deterioration in the business and/or financial profiles of these entities may affect the company’s performance.

Additionally, the Sarawak state government plays a key role in determining Samalaju’s strategic direction and is represented on the company’s board. By extension, regulatory oversight of the Port rests with the Samalaju Port Authority, a state statutory body. In view of BPHB’s diverse shareholding through the Sarawak state government, Petroliam Nasional Berhad, and government-related agencies, the incentive to provide the Company with financial assistance (if and when required) is strong. This will facilitate the success of the SCORE while ensuring Samalaju meets its financial and operational obligations.

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