The A- (A Minus) rating assigned to Malaysian AE Models Holdings Berhad (MAE)’s Fixed Rate Serial Bonds (Bonds) reflects MAE’s competitive position and technical competency in the industry. These factors are moderated by MAE’s exposure to adverse economic factors locally as well as regionally.

MAE was incorporated on 8 May 1992 as a private limited company to function as an investment holding company. MAE group of companies are involved in designing, manufacturing and marketing of materials handling and factory automation systems and components with presence in countries including Singapore, Thailand, Indonesia, Hong Kong and China.

There is fierce competition in the low-end technology products, domestically. However, these low-end products only make up approximately 10% of MAE’s turnover. MAE’s main income stream is derived from high-end technology products and integrated solutions. Competition for high-end products mainly comes from international foreign players such as the United States, Japan and Germany whose main targets are on large projects with contract values of USD20 million and above. As such, MAE is the leading manufacturer and distributor for projects with average value of USD100,000 to USD5 million regionally.

Apart from its in-house technology development, MAE has formed several collaborations and partnership agreements with established multinational companies which have resulted in technology transfers to MAE. Evidencing MAE’s technological achievements, three of its subsidiary companies have been granted Pioneer Status by the relevant authorities.

Revenue in FYE5/03 increased by a significant 21.3% to RM130.8 million from RM107.8 million previously. The increase was attributed to an increase in overseas demand for material handling and contract manufacturing services. Profit before tax, meanwhile, reported only a slight increase of 4.4% to RM10.6 million (FY5/02:RM10.1 million). Consequently, MAE’s operating margin declined to 10.1% from 11.9%. The margin continued to decline due to increasing pressure caused by weak performance of the global manufacturing sector. Pursuant to the Bonds issuance, MAE’s pro-forma debt-to-equity ratio is expected to be 1.0 time in FY5/04. Under the terms of the facility, MAE is required to maintain a Debt to NTA ratio of not more than 1.25 times and a DSCR (Debt Service Coverage Ratio) of not less than 1.5 times throughout the tenure of the Bonds. MAE’s cashflow projections indicate robust DSCR with the average and minimum DSCRs of 10.4 times and 2.9 times respectively.

Barring unforeseen circumstances, MAE is expected to sustain its growth in the short to medium term supported by its breakthrough into the China market in early 2003.