KUALA LUMPUR – Sabah Ports Sdn Bhd may need up to RM1.5bil over the next two to three years to transform Sepanggar Bay Container Port into a trans-shipment hub, says RAM Rating Services.
The ratings agency said on Friday the plan, mooted by the state and federal government, might boost Sabah Ports’ profile from a hinterland-based service provider to that of a regional trans-shipment port operator.
“While Sabah Ports has typically been prudent in capital spending, these plans will necessitate capex of up to RM1.5bil over the next two to three years (RM1.13bil of which will be government-funded).
“(This is) a stark step up from approved capex under the company’s current privatisation agreement (a cumulative RM1.36bil over 30 years) – and may significantly alter its financial risk profile,” it said.
RAM Ratings said it would continue to monitor developments on this front and reassess credit implications as details are made available.
In the meantime, it had reaffirmed the AA3/stable rating of Sabah Ports’s RM80mil Bai’ Bithaman Ajil debt securities (2007/2017) (BaIDS).
The affirmation was based on Sabah Ports’ critical position as Sabah’s main port operator as well as its stable debt-servicing ability.
“In line with our expectation, current weak economic conditions had resulted in Sabah Ports handling lower cargo and container throughput at wharves, which had eroded its top line by 4.5% on-year,” it said.
RAM Ratings said Sabah Ports is inherently exposed to economic cycles and commodity movements in the state, especially palm oil and petroleum, which make up approximately 70% of the company’s cargo throughput.
On another note, Sabah Ports’ leverage indicators are viewed as healthy, with its average adjusted operating cashflow debt coverage ratio expected to come in at 0.29 times in the next two years after factoring in committed capex and additional bank borrowings, it said.
“With ample cash and cash equivalents amounting to RM214.11mil as at end-December 2015, Sabah Ports is deemed to have sufficient liquidity to fund the Company’s final debt obligation of RM10mil under the BaIDS, falling due on 31 March 2017,” it said.