Gamuda’s 70%-owned subsidiary, Kesas has proposed a RM735m IMTN. The  proposed  Sukuk  has  been  assigned  a  AA2  rating  by  RAM  Ratings. Concurrently, RAM Ratings has also reaffirmed the AA3/Stable rating for its RM800m Al-Bai’ Bithaman Ajil Islamic Debt Securities. (Source: RAM Ratings)

Comment:  The  proposed  RM735m  Sukuk  is  not  unexpected.  Kesas  has outstanding  debts  of  approximately  RM208m  which  will  be  fully  paid  in around 2 years while the concession period only ends in August 2023. The debt  restructuring  will  hence  improve  the  funding  structure  of  the concession company and help to free up cash flows for its shareholders, which  include  the  EPF  Board.  According  to  RAM  Ratings,  “Kesas  is expected to generate an average annual pre-financing cashflow of about RM213m per annum over tenure of the proposed Sukuk.

Maintain  ADD  rating  for  Gamuda  with  a  target  price  of  RM5.30.

Source: HwangDBS Research - 1 Oct 2014