MARC has assigned long and short-term ratings of A+ID and MARC-1ID/A+ID to WCT Engineering Berhad’s (“WCT”) proposed Islamic Fixed Rate Serial Bonds of RM100 million and 7-year Islamic Commercial Papers/Medium Term Notes Programme of up to RM100 million (“Islamic CP/MTN”) (collectively known as Islamic Securities or IS). Concurrently, we have also reaffirmed WCT’s existing RM120 million 5% Redeemable Unsecured Bonds with detachable warrants (2000/2005) rating at A+(s). The ratings reflect WCT’s proven track record in the construction and property development sectors, the latter owing to its successful Bandar Bukit Tinggi township in Klang. The ratings are also supported by WCT’s ample financial flexibility, in the form of RM405 million unutilised banking facilities, which can be used for the purpose of meeting any temporary shortfall of payment of the Islamic Securities.

Proceeds from the IS shall be used to part-finance the acquisition of assets and/or investment in businesses or industries similar to WCT group and/or for working capital requirements of WCT and its subsidiaries companies.

During the year under review, revenue declined for the first time in five years as most projects were already completed (or close to completion). The continued slowdown in Malaysia’s construction sector (following the decline in infrastructure and building works) further complicates WCT’s revenue generation. Nonetheless, WCT has managed to
improve its operational efficiency highlighted by the increase in operating profit margin to 15.9% from 9.5% previously. As at 31 December 2004, WCT’s order book stands at RM2.3 billion with outstanding balance of RM1.1 billion yet to be recognised. This is sufficient to sustain its construction activities over the next two years.

Following the completion of WCT’s first overseas project, namely the 57km highway from Tada to Nellore in the state of Andhra Pradesh, India last year, the concessionaire, Swarna Tollway Pte Ltd, where it has a 21.6% equity stake, has commenced tolling of the highway. Looking forward, the concession company will generate a steady source of income for the group.

WCT’s projected cash flow was subjected to several sensitivity analysis test which resulted in the debt service coverage ratio weakening slightly to a minimum of 1.75 times compared to the base case of 2.73 times. The projection shows that the cash flow can comfortably cover the company’s debt servicing obligations indicating the robustness of the cash inflow.

WCT derives its financial flexibility from various bank facilities obtained from financial institutions. These facilities are easily converted into other forms as per WCT requirements. As at 31 March 2005, WCT group total facilities stood at RM838 million of which RM405 million remain unutilised.