MARC has affirmed the rating of A-(A minus) assigned to Bintang Bulk Mover Sdn Bhd’s (BBM) RM50 million 5-year secured serial bond. The affirmation was premised on the Group’s strong operating performance and stable revenue stream, in particular from its long term cement transportation contracts with Lafarge Malayan Cement Bhd (LMCB), the largest local cement manufacturer. The affirmation also reflects the Group’s increasing participation in other transportation services such as inland containerized haulage, freight forwarding and motor vehicle transportation. Supporting the rating is the assignment of all revenue from identified contracts to the Facility as primary source of repayment of the bonds. The rating is, however, moderated by BBM’s exposure to the cyclicality inherent in the cement industry and the intense competition within the general haulage industry.

The Group’s cement transportation business is the largest revenue contributor at approximately 60.0% of total revenue. The LMCB contracts alone contribute in excess of 40% of revenue. BBM’s operating performance has been impressive with historical revenue growing at a five-year compounded annual growth rate of 28.5% with operating margin averaging 15.5% in the last five fiscal years. Ancillary income is derived from BBM’s haulage activities, namely its inland containerized haulage services, freight forwarding services and motor vehicle transportation. These business segments hold growth prospects with the advent of the Asean Free Trade Agreement (AFTA) and BBM’s continued drive to expand its scope of haulage services.

BBM’s extensive fleet of tankers, prime movers and trucks makes it one of the largest second tier hauliers in the country. Operations are supported by several operation centres spread across West Malaysia which provide logistical support and marketing services. With its niche position in the transportation of bulk cement and proven track record of reliability and efficiency, BBM is expected to compete effectively in the intensely competitive domestic haulage industry.

BBM’s historical debt leverage position has hovered around 1.1 times over the past five fiscal years with current interim un-audited debt-equity levelling at a manageable 1.3 times. Its leverage position is expected to progressively fall given the serial redemption feature of the bonds.

The company’s cash flow protection measures reflect an adequate debt servicing capacity. Liquidity protection is accorded to bondholders through the maintenance of a pre-funded sum equivalent to one coupon payment coupled with the build-up requirement of funds for the next coupon payment in a designated account. Principal redemption risk is addressed by a minimum of nine months build-up with three months buffer in the sinking fund account prior to the scheduled redemption dates. Maintenance of these accounts to date has been current.