[RAM] RAM Ratings affirms Konsortium ProHAWK's AA2/Stable IMTN rating; shareholder support a key rating driver
RAM Ratings has affirmed the AA2/Stable rating of Konsortium ProHAWK Sdn Bhd’s (ProHAWK or the Company) RM900 mil Islamic MTN Programme (2013/2033) (the IMTN). The affirmation is underpinned by the strong commitment of ProHAWK’s parent company, UEM Group Berhad (UEM, whose senior instruments are rated AA1/Stable by RAM), to ensure continued performance of its wholly owned subsidiary at a level that is commensurate with a AA2 rating. The Company holds the concession to design, construct, commission and maintain the Hospital Tunku Azizah (HTA) in Kuala Lumpur.
ProHAWK was required to undertake significant rectification works at HTA in 2024. This unexpected development was previously not factored in RAM’s assessment. Inflating the operating expenditure (OPEX) by RM83 mil over the next three years will result in a liquidity shortfall to meet the Finance Service Reserve Account (FSRA) requirements and minimum FSCR of 1.50 times required for the rating.
To bridge the deficit, UEM has provided a Letter of Undertaking to irrevocably and unconditionally provide liquidity support in the form of a standby letter of credit (SBLC) of up to RM60 mil at any one time, as and when required, until 2028 to ensure that minimum FSRA requirements are met. This liquidity line is the latest show of UEM’s support towards ProHAWK, where previous instances have included capital injections of RM189 mil and SBLC procured over the years totaling RM211 mil with the highest amount issued at RM41.5 mil.
Under RAM’s sensitivity analysis, we expect ProHAWK will need to rely on up to RM17.2 mil per SBLC from 2H 2025 until 2H 2028 to meet the IMTN’s FSRA and minimum 1.50 times FSCR requirements. Despite the unanticipated OPEX, ProHAWK’s credit profile remains anchored by a stable and predictable stream of concession-based cash flows. This is further augmented by supplemental cash flows from the wider scope of information and communication technology (ICT) operations and maintenance services, formalised in a Supplementary Concession Agreement in July 2023.
Operationally, the average collection period for concession payments deteriorated to 3.9 months in FY Dec 2023 (FY Dec 2022: 2.4 months), due to significant delays in 2H 2023 payments arising from management changes at HKL. Payments have since regularised for invoices from January 2024 onwards. Average Asset Management Services Charges deductions, meanwhile, have improved to 10.3% in FY Dec 2023 (from 10.9% a year ago) and 8% YTD 2024, where we believe, it will sustain going forward on account of better efficiency.
Analytical contacts
Lee Cheng En
(603) 3385 2506
chengen@ram.com.my
Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my