CREDIT ANALYSIS REPORT

TH Group Bhd - 2006

Report ID 2322 Popularity 1566 views 64 downloads 
Report Date Jun 2006 Product  
Company / Issuer TH Group Bhd Sector Plantations
Price (RM)
Normal: RM500.00        
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Rationale
MARC has affirmed the ratings of TH Group Berhad’s (THG) RM200 million Commercial Papers /Medium Term Notes (CP/MTN) Programme ratings at MARC-2/A. The affirmation reflects the steady operating performances of THG’s plantation and construction divisions as well as its fairly robust balance sheet. Moderating factors to THG’s rating include seasonal factors and/or cyclical developments in plantation and domestic construction sectors and the group’s exposure to the existing venture capital investments. Proceeds from the CP/MTN Programme have been identified for refinancing the existing borrowings (including the outstanding RM75 million BaIDS) with the balance as working capital.

THG is mainly involved in oil palm plantations and contracting services (timber extraction, construction and plantation development) and had ventured into technology and healthcare sectors. THG owns 11,758 hectares of planted oil palm, out of which 81.1% are prime mature area. Its plantation division`s performance has been constantly above the industry’s average for the past five years. Meanwhile, contribution from its construction division has steadily grown and accounted for 50.6% of the group’s total revenue in FY2005. Major projects completed in FY2005 totalled approximately RM336.0 million. As at end-May 2006, total order book of ongoing projects stood at RM366.2 million.

As at March 2006, THG’s total net carrying value of its venture capital’s investments stood at RM34.1 million after taking into account the cumulative provisions for diminution/write-offs totalling RM64.14 million. The division is not expected to make further investments, going forward. Through its subsidiary, Asiaprise Biotech Sdn Bhd, which owns the NCI Cancer Hospital, THG has included healthcare as one of its core activities. THG expects its move into the healthcare industry would enhance the Group’s bottom line in the medium to long term.

In FY2005, THG’s revenue improved by 6.2% to RM320.7 million, thanks to the healthy order book of its construction division as well as the stable performance of its plantation division. However, profit before tax (PBT) was lower by 38.7% due to higher provisions for diminution in value of investments. Higher working capital requirement in FY2005 had weakened THG’s cash flow position to 0.73x (FY2004: 5.6x). Nevertheless, THG’s liquidity position remains manageable with cash and bank balances of RM35.0 million and unutilised bank facilities totalling RM153.0 million as at 31 March 2006. THG’s gearing ratio stood at 0.63x as at March 2006; well below the covenanted level of 1.25x.
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