MARC RATINGS AFFIRMS GAS MALAYSIA'S AAAIS/MARC-1IS RATINGS

MARC Ratings has affirmed its AAAIS/MARC-1IS ratings on Gas Malaysia Distribution Sdn Bhd's (GMD) Islamic Medium-Term Notes (IMTN)/Islamic Commercial Papers (ICP) Programmes with a combined limit of up to RM1.0 billion. The rating outlook is stable. As of end-May 2025, the amounts outstanding under the IMTN/ICP programmes were RM280.0 million and RM150.0 million.

The ratings reflect GMD's solid market position in the natural gas distribution sector, underpinned by its exclusive ownership of the natural gas distribution system (NGDS) in Peninsular Malaysia. This single-player market presence provides the company with a stable and predictable revenue stream, supported by the Incentive-based Regulation (IBR) framework. This regulatory mechanism ensures the recovery of the approved Annual Revenue Requirement (ARR) through timely and formula-based tariff adjustments.

Tolling fees totalled RM398.9 million in 2024, falling short of the approved ARR of RM503.9 million by RM105.1 million. Under the IBR framework, 75% of this shortfall (RM78.8 million) is expected to be recovered by GMD through future tariff increases.

Total revenue rose to RM490.9 million in 2024, up from RM434.7 million the year prior, primarily driven by RM78.8 million in IBR-related revenue adjustments (2023: RM30.3 million). Despite recognising only 75% of under-recovered revenue and contending with higher operating costs, GMD maintained a strong operating margin of 49%, though below its historical average of 53%, underscoring the resilience of its regulated revenue model.

In 2025, GMD anticipates that recognised revenue - as defined under the ARR framework - will fall short of its forecast ARR, primarily due to a decline in firm capacity reservations across the industry. However, the anticipated revenue shortfall is expected to be recovered through a future distribution tariff surcharge.

GMD utilised RM274.3 million of its regu