[RAM] RAM Ratings affirms Westports Malaysia's AAA sukuk ratings

RAM Ratings has affirmed Westports Malaysia Sdn Bhd’s (Westports or the Company) issue ratings below:



The ratings are anchored by the Company’s strong operational and financial performance, reflecting its critical role as the operator of Malaysia’s largest container terminal and a key regional transhipment hub (the Port). The Port’s strategic location along the Straits of Malacca – one of the world’s busiest shipping routes – and favourable tariff structure provide a competitive edge. 

These credit strengths are moderated by Westports’ customer concentration and exposure to trade flow volatility which are influenced by the volatility of economic and trade cycles, shifting supply chains, inclement weather along trade routes, geopolitical tensions and evolving trade policies. Presently, half of the throughput handled is from four Ocean Alliance shipping liners. While the Port will not be a designated hub under the hub-and-spoke strategy of the impending Gemini Cooperation alliance, Westports anticipates a neutral or mild positive impact from spillover container handling. The Company’s long-standing customer relationships also help alleviate perceived concentration risk to some extent.

Despite the inherent industry and market volatility observed, Westports showed resilience in 2023, seeing the Port’s container throughput increasing a lofty 8.3% y-o-y to 10.88 mil TEUs. On balance, the Company is expected to see muted growth in 2024 owing to port congestion caused by the Red Sea crisis earlier in the year which lowered transhipment volumes. 

The Third Supplemental Privatisation Agreement, dated 8 December 2023, between Westports, the Port Klang Authority and the Government of Malaysia, aims to develop Westports 2 by adding eight new container terminals, doubling the Port’s capacity over 30 years. Planned capital expenditure of RM4.8 bil from 2024 to 2028 will be funded by a mix of debt, internal funds and equity. Depending on the pace of spending, the forecasted uptick in debt could pressure Westports’ financial profile and reduce rating headroom, based on our sensitised cash flow projections. The Company will need to maintain a cautious approach to debt management. Nevertheless, the Company has indicated plans for equity fundraising to partially finance Westports 2 after dredging and reclamation works commence. A tariff adjustment could alleviate financial pressures from ramped-up capital spending and a higher debt level. Hence, we anticipate debt coverage and leverage indicators to remain commensurate with an AAA rating in the near term.


Analytical contacts
L Nurisya Abdullah
(603) 3385 2492
nurisya@ram.com.my

Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my