PEFINDO affirms “idAA” ratings to PT Pelabuhan Indonesia IV (Persero) and its Bond

(April 15, 2020)--PEFINDO has affirmed “idAA” ratings to PT Pelabuhan Indonesia IV (Persero) (PIKI) and its Bond I Year 2018. The outlook for the corporate rating is “stable”.

An obligor rated idAA differs from the highest rated obligors only to a small degree, and has a very strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors.

The rating reflects our view of the government’s strong potential support for PIKI due to the strategic importance of seaport s, its more resilient revenue stream during unfavorable global conditions compared to peers, and its operating performance, which we expect to be maintained at a good level. The rating is constrained by the smaller size of the economy of its service area compared to other state-owned seaport operators, its expected higher financial leverage and weaker cash flow protection measures, and the nature of the industry, which is highly dependent on economic and regulatory conditions.

The rating could be raised if PIKI increases its business position within its coverage areas, exceeding expected returns from its new investments – especially from the Makassar New Port, Bitung port, and Kendari port – while maintaining a moderate financial leverage and strong cash flow protection measures. The rating could be lowered if its linkage with the government weakens to the degree that it changes our view on the likelihood of support from the government, implied by a substantially reduced shareholding in PIKI. The rating could also be under pressure if its revenue is significantly lower than projected and/or it incurs substantially larger debt than projected, especially when its new port expansions are not well executed, resulting in a weaker financial profile, particularly if its debt to EBITDA ratio exceeds 4.5x on a sustained basis.

PEFINDO views the Coronavirus Disease (COVID-19) outbreak and the government containment measures worldwide expose global seaport operators to the risk of lower port activities that could negatively impact their business growth, profitability, and financial profile in the near term. We are of the view that its credit profile remains in its current rating category amid this outbreak, supported by its revenue stream that is proven to be more resilient during unfavorable global economic situations than its peers and its flexibility to reschedule its capital expenditure plan that will be majorly financed by debt. We also view that the government lockdown policy will not interrupt cargo and container traffics to provide efficient logistics for critical goods like foods, medicines and daily needs products. PEFINDO will closely monitor these conditions to continually assess the impact of COVID-19, and should there be any material development, we will conduct the necessary actions.

PIKI is a state-owned seaport operator, providing seaport service facilities through 25 port branches and 3 container terminals across 10 provinces in Indonesia: South Sulawesi, Central Sulawesi, Southeast Sulawesi, North Sulawesi, Gorontalo, East Kalimantan, Maluku, North Maluku, Papua, and West Papua. Supported by three subsidiaries — PT Kaltim Kariangau Terminal, PT Nusantara Terminal Service, and PT Equiport Inti Indonesia — it provides several kinds of port services, including ship, cargo, container, and passenger services. PIKI is wholly owned by the government. (ends)