CREDIT ANALYSIS REPORT

Tracoma Holdings Bhd - 2004

Report ID 2095 Popularity 1751 views 23 downloads 
Report Date Nov 2004 Product  
Company / Issuer Tracoma Holdings Bhd Sector Industrial Products - Automotive
Price (RM)
Normal: RM500.00        
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Rationale
MARC has assigned a rating of AID to Tracoma Holdings Berhad’s (Tracoma) RM100 million Al Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS). The rating reflects, amongst others, Tracoma’s vast experience and good track record as one of the leading local automotive component manufacturers and its commendable financial results. The rating is, however, moderated by the vulnerability of the automotive industry and the manufacturing sector to economic swings and growing competition arising from trade liberalization.

Tracoma is primarily involved in the manufacturing and supply of metal-based and tubing parts components for automobiles. Two subsidiaries under Tracoma, namely Tracoma Sdn Bhd (TSB) and Profen Sdn Bhd (Profen), are among thirty Tier-1 suppliers for Proton and Perodua. Besides Proton and Perodua, Tracoma also produces automotive parts for foreign car makers like Toyota, Honda, Nissan, Hyundai and Volvo. Towards this end, Tracoma has received several awards from foreign car makers for its good product quality. With its reputable track record, Tracoma is set to secure more contracts particularly with the liberalisation of the Asean automotive industry.

To diversify its income sources, Tracoma has set up a joint venture with Proton to undertake the manufacture and assembly of Proton models in Indonesia as an effort to tap into the Indonesian and other Asean markets. In addition, the Group is venturing into manufacturing of medium to large dies to complement its existing facility of making small dies.

Prior to FY2003, Tracoma was experiencing year-on-year positive growth with cumulative annual growth rate of 127% from FY1999 to FY2002. The negative growth in revenue and pre-tax profit recorded in FY2003 reflected the situation in the local automotive industry in 2003 where total vehicles sold declined 6.9% compared to the previous corresponding period. For the tenure of the BaIDS, Tracoma is projecting an average operating margin of 23.8%.

Tracoma’s debt servicing capability has been strong as evidenced by the high historical coverage ratios. The sensitivity analyses on Tracoma’s cash flow projection shows sufficient coverage for its financial obligations.

The balance sheet of the Group is well capitalized; aided by low borrowings and significant growth in shareholders’ funds. The pro-forma debt-to-equity ratio is expected to touch 1.2 times following issuance of the facility. Under the issue structure, Tracoma’s debt-to-equity ratio is capped at 1.5 times.
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