PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has affirmed its “AAA” rating on Petronas Dagangan Bhd’s (PDB) Islamic commercial papers (ICP) and Islamic medium-term notes (IMTN) programme of up to RM2 billion, with a stable outlook.
The rating agency said in a statement today that the ratings affirmation reflects PDB’s strong financial metrics, characterised by its sound liquidity and strong leverage position.
PDB’s ratings also incorporate high parental support from Petroliam Nasional Bhd (Petronas) on which MARC maintains a public information rating of “AAA” with a stable outlook.
The stable outlook on the ratings reflects MARC’s expectation that PDB will continue to maintain its current credit profile, it added.
PDB is a leading domestic player of downstream petroleum products, benefitting from an extensive network of more than 1,000 petrol stations across the country, with a strong market position, underpinned by well-established Petronas brand.
Its businesses are divided into four core segments, namely retail (mainly motor gasoline and diesel), commercial (mainly airline fuel), liquefied petroleum gas (LPG) and lubricants.
It retains a healthy market share in the retail and commercial segments, contributing about 50.7% and 49.3% to group revenue of RM22.2 billion for the nine month period of 2018 (9M2018).
The total group revenue rose by 9.4% year-on-year, largely due to higher average selling prices on higher Mean of Platts Singapore (MOPS) prices, the benchmark prices for refined products.
MARC noted that changes in pump prices have had no impact on PDB’s pricing mechanism as it adheres to the automated pricing mechanism under which it is assured of a fixed profit rate that affords earnings stability in the retail segment.
However, MARC said the operating performance of its commercial segment will continue to be susceptible to fluctuations in oil prices and economic cycles.
During 9M2018, PDB incurred higher capex of RM187.3 million, largely due to expenditure for the renovation and upgrading of petrol stations.
The lower cash flow from operations, higher capex and higher dividend payment of RM774.9 million resulted in negative free cash flow of RM484.1 million (9M2017: RM485.5 million).
Nevertheless, MARC noted that PDB has strong liquidity as reflected by cash balances of RM2.9 billion as at end-September 2018.
“The leverage level remained low with a debt-to-equity ratio of 0.01 times. There is currently no outstanding amount under the rated programme,” MARC added.
