MARC’s affirmation of Malaysian Merchant Marine Bhd’s (MMM) rating of AAID on its RM120.0 million Al-Bai’ Bithaman Ajil Serial Bonds (BaIDS) reflects the Group’s proven track record in the highly competitive international shipping industry; its better than average financial profile; as well as a tight issue structure under which the charter proceeds of all its vessels will be assigned as security to the bondholders. Moderating factors include the inherent risks of the shipping industry, high capital requirement and price competition.

Presently, the Group owns and operates a fleet of 13 vessels with a total carrying capacity of 206,977 dwt comprising tankers ( 1 chemical tanker, 4 chemical/oil tankers and 1 product/oil tanker); 3 bulkers (2 general cargo vessels and 1 cape size bulk carrier); and 4 RORO (“Roll-On-Roll-Off”) vehicle carriers. The Group’s revenue peaked in FYE August 2004 at RM119.5 million (FYE2003: RM104.7 million); contributed by RoRo, dry bulk carriage and tanker services. The increased revenue was mainly due to the larger volume of business activity generated from acquired new vessels as well as the increase in freight rates of time charter contracts especially for capsize vessels. Most of MMM’s vessels are currently chartered on a 6 to 48-month basis. A disproportionate increase in operating cost arising from the Group’s acquired new vessels as well as heavier drydock costs squeezed operating margin to 18.8% in FYE2004. For FY2004, profit after tax rose 7.5% year-on-year on the back of a 14% increase in revenue mainly due to higher freight rates and carrying capacity.

With the advent of AFTA, the RoRo or vehicle carrier market is expected to expand, translating into increased demand for RoRo fleet space. The near to medium-term outlook for the intensely competitive dry bulk segment is equally positive, with freight rates improving and the promise of lucrative contracts for iron ore and coal transportation in Malaysia.

The BaIDS are secured by first fixed-charges over MMM Group’s vessels as well as assignment of charter proceeds. The redemption of secondary and primary bonds are accorded priority ranking under the issue structure; further enhancing the protection to bondholders.

As expected, the issuance of the BaIDS increased debt leverage to 1.18x in FY2004. Notwithstanding the above, MMM’s debt-equity ratio is relatively low compared to its peer, Halim Mazmin.