MARC has assigned a rating of AID on Englotechs Holding Bhd’s (Englotechs) Murabahah Medium Term Notes Programme of up to RM50.0 million. The rating assignment is a reflection of Englotechs’s position as a leading manufacturer and exporter of industrial cotton work gloves in Malaysia; the stable and foreseeable increase in demand for its products; stable operating margins over the last four years; and low debt leverage position. The rating, however, is moderated by the increasing competition from China in the manufacturing of standard made gloves as well as the Group’s exposure to the cyclical nature of the cotton industry.

With 15 years of experience in the manufacturing and trading of industrial cotton work gloves, Englotechs is better associated as the Original Equipment Manufacturer (“OEM”) for major brand names such as Ansell, Mapa and Sumitomo. Its ability to manufacture various types of high quality gloves coupled with its established position as a reliable and dependant manufacturer has helped the group to widen its clientele base, (encompassing a majority of foreign customers) over the years. The Group has also distinguished itself by continuously embarking on R&D as a means to widen as well as diversify its product base from standard-made-gloves to various custom-made gloves.

Englotechs operates two plants, located in Padang Meha Industrial Estate, Kedah and Lianyungang in China respectively. As at 31 December 2004,

Englotechs had 663 knitting machines which have a maximum annual production capacity of more than 2.8 million dozen pairs of string knit gloves and more than 3.9 million dozen pairs of cut and sewn cotton gloves. Besides increasing production capacity and product base, the Group’s future strategy, going forward, involves venturing into marketing products under its own brand name.

Englotechs’s revenue growth in the last four years was driven mainly by the increase in sales volume as well as from the introduction of new products. Despite experiencing pricing and margin pressures from the change in strategy (involving the migration from the manufacturing of standard-made gloves to the higher yield custom-made gloves), Englotechs has managed to maintain double digit operating margin which averaged 14.34% in the last four years. As an export oriented manufacturer, 80% of Englotechs’s revenues are contributed by the export market with no revenue concentration in any particular country.

Englotechs’s debt leverage ratio has increased over the years albeit, manageable at 0.48x in 2004. Debt profile is skewed towards short term consisting mainly of working capital facilities. Upon full draw down of the facility, Englotechs’s pro-forma debt leverage based on its FY2005 projected shareholders’ funds (net of goodwill) is estimated at 0.56x. Proceeds from the bond issuance will be mainly utilized for repaying/refinancing of existing borrowings, capital expenditure and working capital.