The rating affirmation of Ingress Sukuk Berhad’s (ISB) RM160 million Sukuk Al Ijarah Issuance at A+ID is underpinned by Ingress Corporation Berhad’s (Ingress) track record as one of the leading local automotive component manufacturers with a diversified customer base and geographical distribution; and its fairly strong financial profile. Moderating factors, however, include the vulnerability of the automotive industry and the manufacturing sector to economic swings and growing competition arising from continuing trade liberalization.

The Group’s operations span across three ASEAN countries – Malaysia, Thailand and Indonesia – providing it direct access to the region’s fastest growing automotive markets. Regionally, the Group is one of the top manufacturers of door sash assemblies and the only automotive vendor manufacturing complete door assemblies. Domestically, Ingress remains as a leading manufacturer of roll-formed mouldings, weatherstrips and the sole manufacturer of door sash and complete door assemblies. The Group supplies its products to renowned car manufacturers such as General Motors/Isuzu, Ford/Mazda, Mitsubishi and Honda. In Malaysia, it primarily supplies to Perodua, which commands a large market share in the compact car section, and Proton, the National carmaker.
In fiscal 2005, Ingress’ revenue rose by 37% to RM213.2 million. However, its pre-tax profit was lower at RM14.4 million attributed to the Power Engineering and Rail Electrification (PER) division which suffered a loss, consequently reducing its operating profit margin to 9.1%.

Based on its latest fiscal results, Ingress’ debt servicing capability remains strong; with CFO interest cover at 11.65 times. Base case cash flow projected an average and minimum DSCR of 2.5 times and 1.7 times respectively over the tenure of the facility.

Debt-leverage has nevertheless increased given the capital intensive nature of the business. Ingress’ shareholders’ funds (including minority interests) have nearly tripled from RM73.9 million in FY2000 to RM213.7 million in FY2005.

As per the issue structure, the Sukukholders hold undivided proportionate beneficial ownership of the Assets and the rights, title, interest and benefits under all the transaction documents. In addition, a purchase and sale undertaking is exercisable by both Ingress and ISB for the redemption of the Sukuks at the maturity of the issuance or upon occurrence of a dissolution event or an event of default to repay any outstanding balance.