The ratings assigned are underpinned by Pesaka Astana (M) Sdn Bhd’s (PASB) competitive position as the leading assembler and provider of customized heavy-duty and specialized vehicles for the Ministry of Defence (MINDEF) and Fire and Rescue Department (BOMBA); the tight issue structure; and the company’s continued improvement in its profitability measures. These factors are, however, somewhat offset by the company’s high debt leverage position.

PASB has over a decade of experience assembling and customizing heavy-duty and special purpose vehicles for MINDEF. Over the past two years, the company has expanded its list of clientele to include BOMBA, Port Singapore Authority (PSA), Fire & Rescue Department of Brunei Darussalam and the Bangladeshi Government. To date, PASB had been awarded various contracts in excess of RM450 million to assemble various types of heavy duty military vehicles/transporters for MINDEF; fire & rescue vehicles for BOMBA and various other commercial vehicles for corporations. PASB’s current total contract outstanding is valued at RM231.5 million. PASB’s revenue continued on an upward trend reaching RM70.8 million in financial year ended January 2003 (FYE Jan 2002: RM45.2 million). A significant portion of the revenue was contributed by its contracts with MINDEF.

The ABBA and CP/MTN programmes are secured by specific assignments of existing and future contracts respectively. With the principal counterparties being MINDEF and BOMBA, that is, effectively the Government, credit risk is significantly mitigated. Proceeds from the contracts are set aside for debt servicing requirements before meeting operational expenditure. Liquidity risk is further mitigated through the maintenance at all times of funds equivalent to 12 months of secondary bonds and MTN coupon payments.

PASB’s pro-forma debt-to-equity ratio will reach a high of 6.4 times upon drawdown of the ABBA and CP/MTN programme before gradually declining, reflecting the effect of accumulation of retained earnings and scheduled amortization of the ABBA facility.