The reaffirmation of Road Builder (M) Holdings Bhd’s (RBH) corporate credit rating of A+ reflects the good financial performance of the group, its strong competitive position in the construction business, experienced management team and strong financial flexibility. The rating is, however, moderated by the inherent cyclicality of the construction and property industries as well as the increasing but manageable debt leverage of RBH.

Incorporated in 1992 as an investment holding company, RBH was dormant until it acquired Road Builder (M) Sdn Bhd, a construction-based company en-route to its listing on the Malaysia Securities Exchange Bhd (MSEB) in 1993. The group is built around four core businesses namely construction, property development, port operations and toll concessions. Being one of the leading construction companies, RBH possesses an outstanding track record in completing quality construction works in a timely manner. The group’s adherence to quality can be seen from it being the first construction company in Malaysia to be accredited the MS ISO 9002 Quality System Certification for building and civil engineering services. The group’s ability to undertake a whole range of construction works including the initial design stage coupled with its strong financial profile allows it to compete in a challenging business environment. With expertise gained from the local projects, RBH is one of the few local companies that had been awarded construction works outside Malaysia, particularly in India; in line with the group’s continuous effort to diversify its income base. As at 31 December 2003, RBH has an outstanding order book of approximately RM1.13 billion, adequate to sustain the revenue base of the group’s construction division for the next three years.

The business divisions managed to record growth in its operating profit in the year under review, which witnessed the toll division posting a 29.0% growth in operating profit. Going forward, RBH will place particular emphasis on its port operations and toll concessions. MARC views this positively as the income generated from these divisions are more recurring and stable and less cyclical in nature. The group is optimistic on the outlook of the tolling and port operations divisions and expects both these divisions to increase their contribution to the group’s pre-tax profit to around 40% by year 2005.

The group’s revenue surged past the RM1 billion mark in FY2003 due to the impressive performance of all core divisions. Operating margin was again in double digits, depicting strong profitability of the group, which in turn translates into a healthy cash flow position. RBH’s debt equity ratio rose marginally to 0.8x from 0.7x, partly due to additional debts incurred by the property and toll divisions of the group. Notwithstanding the increase in debt leverage, it is moderated by RBH’s healthy cash bank balances, growing capital base, sizeable amount of unutilized banking facilities and good reputation in the market.