The corporate debt ratings assigned to DRB-Hicom Berhad (DRB or Group) reflects the Group’s diversified businesses, strong market position and presence in the local automotive industry and manageable gearing position.

Incorporated in 1990 and listed on the Main Board of Bursa Malaysia since 1992, DRB is an industrial conglomerate with more than 50 companies involved in three main business sectors namely automotive, property development & construction and general services.

The Group is currently the country’s single largest integrated automotive player with businesses spanning from manufacturing and assembly of cars and trucks to distribution and sales of passenger cars, trucks and motorcycles. It also undertakes component manufacturing, assembly of military vehicles, body building and the provision of auxiliary services. The mix of both national and foreign cars distributorships help to diversify and smoothen the revenue stream if there is a drop in sales in one of the categories. For financial year ended 31 March 2004, the automotive division contributed 46.6% to the Group’s total revenue and over the past four financial years, revenue contribution from this segment averaged 49.1%. MARC believes that going forward, this division will remain as the major revenue contributor of the Group.

Under the property development and construction division, DRB’s current flagship development is the Proton City development in Tanjung Malim, Perak, which is overseen by Proton City Development Corporation Sdn Bhd, a 60:40 joint venture between DRB and PROTON. The company is entrusted to manage and develop the 4,000-acre land which house the second PROTON plant (with the capacity to produce 1,000,000 national cars annually by the year 2014) and the proposed RM1.8 billion Universiti Pendidikan Sultan Idris (UPSI) Main Campus.

Other prime property projects include the Kota Kemuning Development (50:50 joint venture with Gamuda Berhad), the development in the Glenmarie, Shah Alam area and the



Glenmarie Cove development in Klang. Under the construction sector, it is the main contractor for the Electrified Double Track Project from Rawang to Ipoh and DRB has a 20% stake in Gerbang Perdana Sdn Bhd (Gerbang), the consortium to undertake the development of the Gerbang Selatan Bersepadu (GSB) Project. Going forward, the Group’s 14,080 acres of land bank provides potential for future development in addition to the continued development of the Proton City.

As for the services division, it encompasses a variety of business including solid waste management, financial services, general and life insurances, automotive services, vehicle inspection and maintenance service, tourism, aircraft ground handling provider and information technology. The disposal of the public bus transportation operations to Syarikat Prasarana Negara Berhad in October 2003 relieved the Group from bearing continuous losses from this operation.

Over the past three financial years, DRB’s revenue has been quite stable within the RM4 billion mark. However, for the latest fiscal year, the Group registered an 8% and 14.8% decline in revenue and profitability respectively. Operating margin experienced a decreasing trend as the automotive segment recorded lower margins on the account of aggressive pricing and lower sales volume in line with consumers’ expectation of lower prices, arising from the review of the duty structure. However, the pick-up in auto sales in 2004 and 2005 shall help to boost the Group’s revenue and pre-tax profit for FY2005.

The Group’s cash flow protection measures are strong, backed by cash and deposits of RM1.14 billion as at end March 2004, of which RM951.0 million are free from any encumbrances. DRB’s gearing level has been improving year-on-year as the Group continued to pare down its debts. As at 30 September 2004, the debt-to-equity ratio was 0.86 times with a total debt of RM2.87 billion. Pro-forma debt-equity ratio following the issuance of the RM1 billion Islamic facilities is 0.92 times as 82% of the proceeds will be utilized for refinancing purposes.