MARC has reaffirmed the corporate credit rating of Road Builder (M) Holdings Bhd (RBH) at A+. The rating reaffirmation is reflective of RBH’s diversified earnings base which provides considerable protection against the cyclicality of any particular industry that RBH is involved in; evidenced by RBH’s stable and sustainable financial performance over the years. Moderating factor to the rating is the Group’s exposure to the challenging environment of the local construction sector currently characterised by declining domestic contracts and thinner margins.

Incorporated in 1992 as an investment holding company, RBH is listed on the Main Board of Bursa Malaysia and built around four core businesses namely construction, property development, port operations and toll concessions. Strong contributions from the property and toll divisions overcame the effects of the lacklustre performance of the overall construction industry. Despite the slowdown in the construction sector, RBH was still able to replenish its order book owing to its good track record in the local industry derived from a reputation of delivering quality work and timely completion of projects. RBH’s construction division also benefited from contracts awarded by its property, toll and port divisions.

RBH’s strategy to diversify its earnings base has proven to be successful as its other businesses; namely property development, tolling and port operations have performed better year-on-year. In FY2005, the property division achieved revenue of RM311.4 million, a 38.2% increase from the previous corresponding period. Meanwhile, its tolling business also recorded significant growth in revenue of RM104.5 million, more than double the previous year’s numbers mainly due to the first full year contribution from the New Pantai Highway and a toll rate increase at its Sungai Besi Highway concession. Going forward, major developments at RBH’s port division, which include the construction of a bitumen refinery by a Thai-Malaysian joint venture company, the setting up of an iron-ore pelleting plant by an Australian company and the privatisation of Kemaman Port are expected to enhance its revenue generation. MARC views these developments positively as the potential income generated from this division is recurring, stable and less cyclical in nature.

For FY2005, RBH has maintained its billion-Ringgit revenue mark albeit lower than the previous year, with a decline of 11.6% year on year to RM1,025.2 million. This was mainly due to a 35.4% decrease in construction revenue to RM507.8 million, over that of the previous year. Operating margins however, have increased and have been maintained in the double digit region due to better profit margins registered by the property, toll and port divisions. RBH’s borrowings have been quite stable with just a 1% increase over the previous year. RBH’s financial flexibility is favourable owing to its healthy cash balances, a growing capital base and a good reputation in the market.