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Penang Port Sdn Bhd (PPSB) is expected to generate a net annual operating
cash flow of RM80 million – RM90 million upon completion of the expansion of
North Butterworth Container Terminal Phase 2B.
The Penang Port operating company’s operating cashflow debt cover is
anticipated to be maintained at above 0.2 times - a comfortable level given
its stable cash generation highlights Rating Agency Malaysia Bhd (RAM).
Reaffirming the long-and short-term ratings of A2 and P1 for PPSB’s proposed
RM100 million Islamic Commercial Paper/Medium-Term Notes Programme the
rating agency says PPSB’s operating cashflow should be sufficient to fund
all routine capital expenditure.
RAM says even after taking into account internal projects and maintenance
dredging costs, PPSB should be able to generate an annual free cashflow of
RM40 million – RM70 million after financial year 2007.
The report says Penang Port’s performance correlates very closely with the
level of economic activity within its hinterland. Penang Port’s performance
for 2005 is not expected to be as robust as that of 2004 due to slower
economic growth.
Penang’s GDP growth is expected to slow down to 5 per cent – 6 per cent in
2005, moderated by the more lethargic global trading activities arising from
lofty global oil prices.
RAM notes that Penang Port’s 6-month performance up to end-June 2005
indicated only slight increases of a respective 2.35 per cent and 3.37 per
cent in overall throughput and container volumes.
The slower overall growth in cargo throughput had been due to the increasing
shift towards containerised cargo, which had to some extent impaired the
volumes of break-bulk and dry-bulk cargo.
Penang Port’s tariffs, which have been static since 1980, remain a cause for
concern; Penang Port has some of the lowest tariffs among local port
operators.
Non-revision of tariffs would exert considerable pressure on PPSB’s
operating margins in the future.
Although the proposed 30 per cent tariff revision has been tabled to the
Penang Port Consultative Committee, the timing of the implementation and the
eventual quantum approved by the regulators remain uncertain at this
juncture.
RAM highlights that any upward revision in port tariffs may well have a
positive impact on PPSB’s financial standing.
Hence, the long-term rating of the proposed CP/MTN may be revised
accordingly to reflect PPSB’s improved credit profile. |
