The rating of A+(bg)ID/ MARC-1(bg)ID assigned to Mulpha International Bhd (MIB)’s RM75.0 million Proposed Bank Guaranteed Murabahah Notes Issuance Facility (MUNIF) reflects the unconditional and irrevocable bank guarantees provided by AmMerchant Bank Berhad and Southern Bank Berhad; whilst the rating of AID/ MARC-2ID assigned to MIB’s RM25.0 million Proposed Murabahah Commercial Paper/ Medium Term Notes (CP/MTN) reflect the company’s good financial position aided by strong performance of its Australian operation. This is, however, tempered by vulnerability to adverse developments in the property market and forex translation risk associated with its foreign operation.

Listed on the Main Board of Bursa Malaysia, MIB is a diversified group with principal activities including property development and investment, hotel ownership and operation, manufacturing, trading and provision of financial services. MIB is also geographically diversified with operations spread in Malaysia, Australia, China, Hong Kong, Singapore and Vietnam. In recent years, MIB has ventured into property development in Australia through its wholly-owned subsidiary – Mulpha Australia Limited (MAL). In June 2004, MAL had also completed the acquisition of the entire issued and paid-up share capital in Mulpha Hotel Investment (Australia) Pty Ltd (formerly known as Principal Financial Group Investment (Australia) Pty Ltd) (MHI). Through the acquisition, MIB has become the owner of four leading hotels in Sydney, Brisbane, Hayman Islands and Melbourne. Returns from its Australian investments have been encouraging with strong demand for the properties developed by MAL and appreciation of the Australian Dollar.

The property sales from Leisure Farm Resorts (LFR) and Bandar Seri Ehsan (BSE) have been identified as the main sources of repayment for the private debt securities. Under the issue structure, part of the proceeds from the sales of certain properties under LFR and BSE shall be set aside for principal repayment of the private debt securities. LFR, the flagship development of MIB in Johor Bahru, is a high-end integrated residential cum resort development with an estimated gross development value (GDV) of RM1.9 billion. LFR is strategically situated within the growth area of Bandar Nusajaya, which offers a ready catchment area, good accessibility and modern infrastructure. Conceptualized as an integrated residential cum resort development, mirroring that of its sister project in Australia, Sanctuary Cove, LFR has attracted demand from local residents, expatriates and wealthy Singaporeans. BSE is an integrated residential township project, located in Sepang within the Multimedia Super Corridor and is 6 kms away from the Kuala Lumpur International Airport (KLIA). The GDV for the project is estimated at RM2.0 billion with a total of fourteen phases. The launched phases have been well-received aided by the affordable pricing of the properties.

In addition to redemption sum identified for BSE and LFR, up to 50% of the net dividends received by MIB declared by MAL will be kept in a designated account. Refinancing risk is largely mitigated through the serial redemption payment structure of the proposed PDS. The maintenance of a six-month liquidity buffer, to an extent, mitigates liquidity risk.

MIB’s profitability and cash flow protection improved significantly in FY2003 aided by strong contributions from its Australian operations. In addition, MIB’s balance sheet is well capitalized with shareholders’ funds of RM1.6 billion. Under the issue structure, the debt-equity ratio is capped at 1.0 time.