Road Builder (M) Sdn Bhd’s rating has been affirmed at A+(s) reflecting its competitive position in the civil engineering and building segment, good track record, experienced management team and a tight issue structure. The rating also reflects the shareholder support of up to RM200 million on a reducing balance provided by the holding company, Road Builder (M) Holdings Bhd (RBH). Moderating the above-mentioned factors are the cyclicality of the construction industry, RBM’s increased debt leverage upon issuance of the bonds and the industry’s high working capital requirements.

RBM’s (a wholly-owned subsidiary of listed RBH) credit strength is drawn from its experience as one of the established construction companies in the country with experience in a wide range of civil engineering and building projects. Its competitive position is supported by its ability to undertake various construction projects, favourable track record of quality work, timely completion of projects and good financial resources. Its financial performance in FY2003 was commendable, reflected by the significant growth in its revenue which surpassed the one billion ringgit mark from RM670.4 million previously. The 49.2% increase in revenue was attributable to the completion of major projects as well as RBM’s sizeable secured order book. RBM’s growing participation in international markets further provides support to its earnings base and provides it with an element of diversification as it consolidates itself in the competitive domestic market.

RBM’s list of completed domestic projects amongst others include the Istana Melawati in Putrajaya, Jus Dam in Malacca, Sungai Muar-Durian Tunggal pipeline, Sungai Dua Water Treatment Plant in Penang, Container Berth in Kuantan Port, Seremban Two township, Seri Saujana Bridge in Putrajaya, the Commuter Rail Station in Kuala Lumpur International Airport and Proton Plant infrastructure works in Tanjung Malim. On the international front, RBM has gained a footing in India and has completed and secured a number of highway contracts involving the widening and strengthening of roads. Another three highway projects are on-going with expected completion dates of 2005, 2006 and 2007.

Coupon payments under the bonds are supported by a liquidity buffer maintained in a Debt Service Reserve Account whilst the principal repayment is addressed by the build up of funds in a Sinking Fund Account. In the event of a shortfall in the account, the holding company RBH, is required to cover such shortfall subject to a limit of RM200 million. Essentially, bondholders have priority interest over the company’s funds by operation of the payment waterfall established under the issue structure.

RBM’s debt leverage declined to 1.24 times in FY2003 from 2.0 times in the previous year due to decreases in overdraft facilities and an expansion in shareholders’ funds.