[RAM] RAM Ratings upgrades MEX Capital's sukuk to AA2 on traffic and revenue outperformance
RAM Ratings has upgraded to AA2/Stable from A1/Positive the rating of MEX I Capital Berhad’s (MEX Capital) RM1.13 bil Senior Sukuk Musharakah (2022/2040) (the Sukuk).
MEX Capital is reliant on cash flows from its 96.8%-owned subsidiary, Maju Expressway Sdn Bhd (MESB) – the concessionaire for Maju Expressway (MEX or the Expressway) – to service the Sukuk. The rating upgrade is based on MEX’s sustained traffic and revenue outperformance since the Sukuk’s issuance three years ago. The receipt of RM157 mil of compensation payments in early 2025 in lieu of a toll rate increase, further boosted its cash reserves. Consequently, MEX Capital’s projected finance service coverage ratios are anticipated to perform above 2.5 times going forward.
The sukuk rating nevertheless incorporates downward adjustment for past governance lapses as well as concession restructuring risk. These could result in lower or flat toll rates and the discontinuation of any further government compensation payments in return for a concession extension. MESB’s dependence on compensation payments, which constituted a significant 34% of its 2024 revenue, makes the Sukuk’s credit quality more susceptible to any CA reform. We will continue to monitor ongoing developments and reassess the rating as necessary.
Under the Sukuk’s financing terms, any amendments to the MEX concession agreement (CA) remain subject to sukukholders’ consent. The CA’s remaining tenure allows room for refinancing and/or debt structure and annual repayment reprofiling, if required. Given its strategic alignment, MEX enjoys favourable project economics, demonstrating strong traffic growth in recent years. Its average daily traffic reached a historical high of 176,248 vehicles in 2024 (+8% y-o-y) and 173,470 for the first half of 2025. Continued robust development activity and attractions along MEX’s alignment anchor the Expressway’s and MEX Capital’s strong business and financial prospects.
During the review period, spending on MEX’s operational and maintenance upkeep stayed within permitted limits although management has indicated the need for an upward cost revision. While the transaction’s budgetary limits ensure discipline and cost containment, the Expressway’s strong traffic affords MESB some flexibility to shoulder additional costs if necessary.
RAM’s assessment also considered recent controversies over MEX II Sdn Bhd, a sister company of MEX Capital with a common shareholder, Maju Holdings Sdn Bhd. In our view, these have no credit bearing on the Sukuk beyond a common directorship held by key MESB personnel. Investigations into MEX II by the Anti-Corruption Commission and the construction of the MEX II Highway however, resulted in the impairment of amounts owing to MESB and MEX Capital from Maju Holdings, given MESB’s auditor’s concerns whether these may be recovered. In RAM’s assessment of the Sukuk’s credit quality, no benefit was given to the repayments of the impaired advances.
Like other toll road concessionaires, MESB is inherently exposed to regulatory and single-project risks. Potential concession termination or expropriation is an event risk. Under such circumstances, the CA does not obligate the government to compensate MESB or its lenders. MEX is a 26 km open-toll expressway connecting central Kuala Lumpur to Putrajaya and Cyberjaya. The 16.8 km extension referred to as MEX II Highway was expected to complete MEX’s linkage from Putrajaya and Cyberjaya to Kuala Lumpur International Airport upon its completion.
Analytical contacts
Chew Chiang Lim
(603) 2708 8297
chianglim@ram.com.my
Davinder Kaur Gill
(603) 2708 8220
davinder@ram.com.my
Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my