MARC Ratings has affirmed its AA+IS rating on EDOTCO Malaysia Sdn Bhd's RM3.0 billion Islamic Medium-Term Notes Programme with a stable outlook.

The affirmation continues to reflect EDOTCO Malaysia and its subsidiaries' (collectively EDOTCO Malaysia Group) leading position in the growing domestic telecommunication tower industry, the underlying stability of its business model that provides strong cash flow visibility, and the low operational and counterparty risks.

EDOTCO Malaysia Group has sustained its market leadership, holding approximately 18% of the country's telco towers. Over the past 15 months, it added 176 towers and 918 tenancies, expanding its portfolio to 6,349 towers and 15,308 tenancies, lifting the tenancy ratio to 2.4x from 2.3x a year earlier. In its financial projections, the Group has taken a conservative approach in its base case, assuming the non-renewal of a related telco's expiring tenancies in 2025 and 2028, due to ongoing network integration. This is partially offset by additional demand from the country's ongoing 5G expansion and rollout of the second network. As a result, the tenancy ratio is projected to moderate to 2.1x by 2028/2029. The rating agency notes that discussions are ongoing to address the affected tenancies, and the Group is exploring options such as partial renewals, longer lock-in periods and migration of tenants to new builds or co-locations.

Despite this cautious assumption, the Group's financial profile is expected to remain stable, supported by steady revenue (RM1.0 billion to RM1.2 billion) and strong EBITDA margins (low 70%), consistent with prior years. In 2024, core revenue rose 7% y-o-y to RM941.5 million, while EBITDA margin improved to 72.2% - the highest in the past five years - driven mainly by cost efficiencies from increased co-locations. The Group entered 2025 on solid ground, reporting revenue of RM227 million and an EBITDA margin of 66.6% in the first quarter, both broadly in line with figures fr