Road Builder (M) Sdn Bhd’s (RBM) rating has been reaffirmed 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 scaling down of government expenditure and prioritization of projects and the higher prices of steel raw materials in the international market which translates into an overall increase in construction costs.

RBM’s (a wholly-owned subsidiary of listed RBH) credit strength is drawn from its established position within the construction industry 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.

RBM’s financial performance in FY2004 was commendable, though showing a slight decline as a result of the government’s effort to trim the country’s budget deficit. Revenue slipped by 9.5% to RM904.9 million against a strong performance last year. Despite the prevailing condition, the Company managed to secure a number of new projects simultaneously replenishing its orderbook to a total of more than RM1.3 billion as at December 2004. RBM’s growing participation in international markets further provides support to its earnings base along with an element of
diversification as it consolidates itself in the competitive domestic market. RBM’s margin fell from 14.1% in FY2003 to 5.7% in FY2004 due to the escalating costs of raw materials, i.e. steel and diesel.

RBM’s list of completed domestic projects amongst others include the New Pantai Highway, water treatment plant at Merbau Chandong, Kelantan, Alamanda Shopping Complex, Komplex Perbadanan Putrajaya, Istana Melawati in Putrajaya, Jus Dam in Malacca, Sungai Muar-Durian Tunggal pipeline, Container Berth in Kuantan Port, Seremban Two township, Seri Saujana Bridge in Putrajaya and the Commuter Rail Station in Kuala Lumpur International Airport. On the international front, RBM has gained a footing in India and has secured and completed a number of highway contracts involving the widening and strengthening of roads.

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 increased to 1.29 times in FY2004 from 1.25 times in the previous year due to lower distributable reserves after payment of dividend and slight increase in hire purchase creditors.