S&P Upgrades MISC To 'BBB+' On Steady Cash Flow Adequacy; Outlook Stable

By Massita Ahmad SINGAPORE, Aug 12 (Bernama) -- S&P Global Ratings has raised its long-term corporate credit rating on MISC Bhd to 'BBB+' from 'BBB' with stable outlook. It also affirmed its 'axA+' long-term ASEAN regional scale rating on the Malaysia-based shipping company. At the same time, S&P raised the senior unsecured long-term ratings on MISC's bank loans to 'BBB+' from 'BBB'. "The upgrade reflects our expectation that MISC will maintain solid cash flow adequacy through 2018 because of steady cash flows, moderate capital spending, and prudent financial policies," said S&P Global Ratings credit analyst Wei Kiat Ng in a statement on Friday. "We anticipate that the company's ratio of debt to Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) will stay below 2.5x through 2018. "We adjust debt by adding operating leases and pensions, and deducting surplus cash," Wei said. Wei said MISC's performance in the first half of 2016 was solid and better than expected, with cash flows remaining resilient amid difficult market conditions. The company's reported EBITDA of US$614.28 million (RM2.46 billion, US$1 = RM4) for the six months ended June 30, 2016, was about 55 per cent of S&P's full-year forecast and operating cash flows (including net interest expenses) of RM2.74 billion were about 58 per cent. MISC's exposure to liquefied natural gas (LNG) shipping through long-term contracts with its 62.7 per cent owner Petroliam Nasional Bhd (PETRONAS, Malaysian oil and gas company) helped profit and cash flow stability in the second quarter of the year, despite reduced spot rates. S&P forecasts MISC's EBITDA at between RM4 billion and RM4.5 billion in 2017 and 2018. The company is taking delivery of five new LNG vessels between 2016 and 2018, all of which have long-term charter contracts with PETRONAS. EBITDA will also benefit from the full-year contribution from MISC's full ownership in Gumusut-Kakap Semi-Floating Production System (GKL). All of these factors combined will partly offset the effects of a likely decline in LNG and tanker rates over the period. S&P said MISC's reduced capital spending will enable the company's cash flow adequacy to stay solid. As a result of lower spending, S&P expects the marginally negative discretionary cash flows in 2017 to turn positive in 2018. S&P projects reported net debt peaking at about RM8 billion in 2017, and declining thereafter as the company accumulates cash. In S&P's view, MISC will maintain prudent financial policies. --BERNAMA