The "stable" outlook reflects DMT's stable and predictable operating performance and financial policies. DMT's ratings could be upgraded if the final verdict of the Supreme Administrative Court affirms the effectiveness of the MOA3 agreement. In contrast, the rating downside case may occur if DMT's financial flexibility deteriorates further or if there is a significant adverse legal outcome.
Founded in 1988, DMT constructed and now operates a 21-kilometer (km.) elevated tollway running from Din Daeng to the National Memorial Monument. The tollway was constructed under a Build-Transfer-Operate (BTO) concession granted by the Department of Highways (DOH). The concession was amended three times. The latest amendment to the concession agreement was made on 12 September 2007 (MOA3) according to the Cabinet resolutions on 11 April 2006 and 10 April 2007. The MOA3 was concluded to resolve all the pending issues which DMT had claimed for the losses incurred by the Government's actions. The key amendments of the MOA3 dealt with an extension to the concession maturity from 2021 to 2034, and pre-approved the toll fee increases suggested in the previous amendment.
On 18 August 2015, the Central Administrative Court revoked the Cabinet resolutions in 2006 and 2007 in relation to the MOA3. DMT and the Ministry of Transportation, following the Cabinet resolution on 15 September 2015, filed an appeal with the Supreme Administrative Court. The appeal process may take time to finalize. In any case DMT's management expects that the dispute would be resolved with some remedy or compensation to the company. As a single asset, the severity of loss, if the Court's order is unfavorable to DMT, is significant. Hence, DMT's financial flexibility is uncertain. The projected operating cash flow from now until 2021 is sufficient to meet its current debt obligations and required capital expenditures. However, DMT's tight liquidity profile in the near term remains a concern.
DMT continues to deliver the sound operating performance. DMT's total traffic volume increased by 4% year-on-year (y-o-y) in 2014 and for the first half of 2015. The traffic growth was driven by the strong growth in passengers traveling on low cost airlines and expanding communities along with the development of mass transportation. DMT reported a greater increase in revenue due to the adjustment of toll fees in December 2014. The company's total revenue increased by 5% in 2014 and further rose by 24% y-o-y for the first half of 2015. Consequently, DMT's profitability and funds from operations improved. The debt to capitalization ratio averaged 50% during the last three years, reflecting DMT's high dividend payout.
Going forward, DMT's revenue is projected to grow moderately. Two factors will drive growth: a terminal expansion at Don Mueang airport, and the prospects for the tourism industry. The operating profit margin will remain high and stable. The cash flow protection and leverage ratios will improve as DMT plans to pay down the outstanding debentures, or refinance the debentures but at a lower amount. DMT's management views that the company will continue to pay dividends upon the cash available. However, the company will not incur any debt due after 2021 in order to prevent the risk of the unfavorable court judgment.
Don Muang Tollway PLC (DMT)
Company Rating: BBB+
Issue Ratings:
DMT15DA: Bt1,400 million senior unsecured debentures due 2015 BBB+
DMT16NA: Bt400 million senior unsecured debentures due 2016 BBB+
DMT16NB: Bt800 million senior unsecured debentures due 2016 BBB+
DMT178A: Bt250 million senior unsecured debentures due 2017 BBB+
DMT17DA: Bt1,478 million senior unsecured debentures due 2017 BBB+
DMT20DA: Bt1,140 million senior unsecured debentures due 2020 BBB+
Up to Bt1,100 million senior unsecured debentures due within 2019 BBB+
Rating Outlook: Stable