MARC has assigned a rating of A+ID/MARC-2ID to Emas Kiara Industries Berhad’s (“EKIB”) Partially Underwritten Murabahah Notes Issuance Facility/Islamic Medium Term Notes Issuance Facility (“MUNIF/IMTN”) Programme of up to nominal value of RM80 million. The rating assignment is a reflection of EKIB’s position as a leading market player in the geosynthetics products segment in Malaysia, the stable and foreseeable increase in demand for its products domestically and regionally, stable operating margins over the last three years and low debt leverage position. The rating, however, is moderated by the competition within the industry, end users receptiveness to the products and the potential increase in the price of resin which is a polymer related products.

EKIB is principally an investment holding company listed on the Second Board of Bursa Malaysia Securities Berhad. Its subsidiary companies are involved in the manufacturing and trading of various types of geosynthetic and industrial textile products. In addition, its subsidiaries also provide design & installation services to the customers.

Within a period of 10 years, EKIB has grown to being the domestic leader in the manufacturing of geosynthetic products. Its joint venture with a Korean partner in 2001 enables the group to produce polypropylene staple fibres in Malaysia and helped the group to be an integrated manufacturer in the geosynthetic products sector. Additionally, the availability of polypropylene fibres has provided EKIB with an advantage to penetrate into other application particularly in the industrial textile product segment. EKIB’s integrated facilities allow the group to produce a diverse range of geosynthetic products for its end-users thus making the group a one-stop manufacturing centre. The economies of scale enjoyed by EKIB by virtue of being vertically integrated makes it cost competitive and simultaneously allows the group to set the prices of its products competitively.

Revenue growth has been on an upward trend over the past three years, a reflection of the group’s continuing growth in the industry. However, FY2004’s double-digit revenue growth has not led to better pre and post tax profits. The drop was primarily due to the sudden increase in resin prices and higher expenses incurred for marketing and promotional activities to grow export sales which consequently led to a higher operating cost. Going forward, EKIB expects to realise higher revenue contribution from the export market with emphasis in supplying geosynthetic and industrial products.

Despite the positive revenue growth, MARC noted that the debt leverage position of EKIB over the past three years has been trending downwards. An initial drawdown of RM45 million would result in a proforma debt-to-equity position of 0.65x for FYE2005.

MARC’s sensitivity analysis on EKIB’s projected cash flow reveals a robust cash flow even under the worst case scenario. Notwithstanding, the Noteholders interest are further protected with the requirement to maintain a Finance Service Account for the purposes of capturing the necessary monies for the repayment of the MUNIF or IMTN.