The ratings of MARC-1ID/A+ID for up to RM250 million Islamic Commercial Paper/Islamic Medium Term Notes (ICP/IMTN) are predicated upon Nam Fatt Corporation Berhad’s (Nam Fatt) competitive position in the construction and engineering business with a sizeable outstanding order book; good operating track record; improving financial profile and a tight issue structure with pre-determined criteria of contracts that could be financed under the said facility.

Nam Fatt, which is listed on the Main Board of Bursa Malaysia, currently has four main business lines namely, construction & engineering, property development, leisure and manufacturing. Nam Fatt has rationalised its businesses into two main business areas, namely construction & engineering and property development. It has disposed its industrial boiler manufacturing company, the main company under the manufacturing division, and will regroup the remaining two manufacturing companies under the construction and engineering division as both companies are involved in the manufacturing and installing of roofing materials. As for the leisure division, it would be categorized under property development together with its other property development project, the Kesuma Lakes development.

Nam Fatt, thus far, has completed various projects for the Government, PETRONAS-related companies, and Putrajaya and has steadily build-up its order book from RM467 million in FY1999 to RM1.0 billion as at 31 May 2005. Among the notable on-going projects are the RM684.0 million contract to construct pumping facilities for Petrodar Operating Company Ltd (in which
PETRONAS and China National Petroleum Company have majority stakes) and the RM548.8 million contract to construct the Integrated Customs, Immigration and Quarantine Complex in Johor for Gerbang Perdana Sdn Bhd.

The ICP/IMTN programme will be secured against future contracts with counterparties having the same rating as the Malaysian Government or where payments are made directly via banking facilities with banks that are rated at least AA- or its equivalent or foreign banks with ratings equivalent to Malayan Banking Berhad’s foreign rating. This helps to significantly reduce the credit risk of Nam Fatt’s counterparties. Proceeds from these contracts will be captured in a designated account and monies accumulated in the account will be utilized to repay any outstanding notes before operating expenditure.

Nam Fatt’s revenue trend for the past financial years was mixed with growth declining from FY1999 to FY2001, before registering a steady climb in FY2002 and FY2003. Revenue had grown at a compounded annual growth rate (CAGR) of 27.9% since FY2001. Pre-tax profit grew year-on-year since 1999, with the exception of FY2001, with a CAGR of 73.5%. For FY2003, pre-tax profit more than doubled following the waiver of scheme borrowings of RM47.4 million under the Group’s Debt Restructuring Scheme (DRS) completed in July 2003. Going forward, the Group’s outstanding order book of RM1.0 billion should sustain its revenue and earnings over the next two to three financial years. The pro-forma debt-to-equity ratio is expected to be 0.91 times.