MARC has assigned a rating of A (A Flat) to Haisan Resources Berhad (HRB)’s proposed RM30 million bond; reflecting its strong competitive position in the refrigeration and ice industry; assignment of specific contract proceeds towards redemption of the bonds; as well as HRB’s good operating profit margin and manageable debt leverage position. The rating is, however, moderated by the Group’s vulnerability towards cyclical developments in the industry.

From its beginning as a company trading in refrigeration equipment over 30 years ago, HRB is today an integrated refrigeration player. It is principally involved in industrial refrigeration and logistics solution, provision of engineering services related to industrial refrigeration, ice manufacturing and warehousing. The Group obtained its listing status on the Second Board of Bursa Malaysia in January 2001.

Owning approximately 275,400 square feet of TCL warehousing space, HRB’s TCL operation has been expanding over the years and is currently the biggest revenue contributor for the Group. HRB’s modern facilities coupled with its good services had earned itself a clientele base comprising leaders and multinational corporations in their respective industries. With a strong foothold locally, HRB has successfully ventured into China and the Philippines.

HRB’s engineering division is also well-regarded as
one of the leading fabricator-contractor of industrial refrigeration equipment in Malaysia with more than three decades of experience. In addition to servicing its customers, the engineering division offers the Group an added advantage in its in-house TCL division.

Under the issue structure, a Revenue Account (RA) will capture the rental proceeds of approximately RM6.5 million per annum from three specified contracts. Monies in this account are earmarked for the redemption of the bonds upon maturity. HRB’s good competitive position in the provision of multi-temperature controlled facilities (MTCF) highly mitigates the risk of termination of contracts. While the bonds have a bullet repayment payment structure, liquidity risk is largely mitigated through the build-up mechanism of the FSRA; whereby 20% of the total facility amount shall be deposited into the FSRA annually starting from the first anniversary date of the facility.

HRB’s revenue has been on an upward trend. While operating profit margin weakened in recent financial years due to the Group’s expansion, it is nevertheless still in double-digit territory. The Group’s balance sheet is well managed with a debt-equity ratio of below one time for the past four fiscal years Upon issuance of the bonds, HRB’s pro-forma debt equity ratio will stand at approximately 0.75 times.