The A+ID rating assigned to Ingress Sukuk Berhad’s (ISB) Sukuk Al Ijarah Issuance reflects Ingress Corporation Berhad’s (Ingress) track record as one of the leading local automotive component manufacturers with a diversified customer and geographical distribution; and above average financial results characterized by its favourable operating profit margin. Moderating factors include the vulnerability of the automotive industry and the manufacturing sector to economic swings and growing competition arising from trade liberalization.

Ingress is currently one of the domestic manufacturers of roll-formed mouldings, weatherstrips and the sole manufacturer of door sash and complete door assemblies. In the ASEAN region, the Group is one of two manufacturers of door sash assemblies and the only automotive vendor manufacturing complete door assemblies. Ingress supplies its products to renowned car manufacturers such as General Motors/Isuzu, Ford/Mazda, Mitsubishi and Honda. On the local front, it primarily supplies to Perodua, which has a niche market in the compact car section, and Proton. The Group’s operations span across three countries – Malaysia, Thailand and Indonesia – affording it direct access to the region’s fastest growing automotive markets.

The Sukukholders will hold undivided proportionate beneficial ownership of the Assets and the rights, title, interest and benefits under all the transaction documents. In addition, a purchase and sale undertaking is exercisable by both Ingress and ISB for the redemption of the Sukuk at the maturity of the issuance or upon occurrence of a dissolution event or an event of default to repay any outstanding balance.

Over the past four fiscal years, Ingress’ operating profit margin averaged 20.3%, although the margin for FY2004 dropped to 15.0%; reflective of the situation in the local automotive industry in 2003 where total vehicles sold declined 6.9% compared to 2002. Ingress is projecting an average operating margin of only 13.2% going forward, dragged down by higher depreciation expense; reflecting its expansion plan.

Ingress’ debt servicing capability has been strong; with CFO interest and debt service coverage ratio averaging 8.1 times and 10.5 times respectively over the FY2000 to FY2003 period. Base case cash flow projected an average and minimum DSCR of 2.5 times and 1.7 times respectively over the tenure of the facility. Based on its latest fiscal results, the company has a strong liquidity position with current and quick asset ratios of 1.6 times and 2.1 times respectively.

Ingress’ debt-leverage appears manageable given the capital intensive nature of the business. Ingress’ shareholders’ funds have more than doubled in the last five years from RM73.9 million in FY2000 to RM163.3 million in FY2004. Pro-forma debt-to-equity ratio following the issuance of the RM160 million Sukuk Al Ijarah is 1.1 times.