MARC has reaffirmed the rating of Stenta Films (Malaysia) Sdn Bhd’s (Stenta) RM90 million Murabahah Notes Issuance Facility (MUNIF) at MARC-3ID. The reaffirmation reflects Stenta’s ability to fulfil its obligation under the revised payment schedule of the MUNIF, as approved by the Noteholders and Securities Commission.

Stenta is the leading domestic BOPP films manufacturer commanding approximately 50% market share in terms of local production of BOPP films. On the back of strong operational and technical support from AKPI, which has more than 20 years of experience in producing BOPP films, Stenta has earned a good reputation by producing quality films. Stenta’s high quality BOPP films has given the company a competitive edge over the low-cost producers in China.

Due to the recent hike in the price of raw materials (petroleum-based resins) in producing BOPP films, Stenta had revised the reduction schedule, which will concentrate the redemption towards the end of the MUNIF.

Refinancing risk is somewhat mitigated through the serial redemption of the MUNIF. Liquidity risk, on the other hand, is alleviated by the maintenance of cash reserves in designated accounts. Upon issuance of the MUNIF, RM5.0 million was deposited into a Maintenance Account serving as a liquidity buffer for the noteholders.

Despite reporting higher revenue in FT2004, Stenta’s profitability was affected by higher cost of sales, reflected in the lower pre-tax profit and operating profit margin. The company’s revised cash flow projection incorporating the revised reduction schedule shows its vulnerability to further increases in raw material prices. Nevertheless, Stenta is expected to have adequate ability to meet its obligations under the MUNIF as two-thirds of the principal repayments are only scheduled in the sixth and seventh year of the MUNIF when the price of raw materials is anticipated to stabilise.