The ratings of Weida (M) Bhd’s (Weida) RM100 Million Murabahah Underwritten Notes Issuance / Islamic Medium Term Notes Facility have been affirmed at A+ID /MARC-1ID with a stable outlook. The affirmation is premised on Weida’s sound financial performance and its position as one of the largest domestic manufacturers of a wide range of high density polyethylene (HDPE) engineering products for the water and sewerage industry in Malaysia. The rating is however moderated by the rising production costs of raw materials.

Weida is an investment holding company with subsidiaries principally involved in the manufacturing and trading of HDPE engineering products such as sewerage and sanitation systems, storage tanks, pressure pipes and drainage pipes for the water and sewerage industry. The Group’s main revenue is from the sale of its HDPE engineering products which contributed on average 83% of its total revenue for the past five years. At present, Weida has three manufacturing plants strategically located in Kuching, Kota Kinabalu and Nilai. The plants are currently cumulatively operating at 18,000 MT per annum representing 60% of the total production capacity. Weida also manages and maintains the only septic sludge treatment plant in Kuching, Sarawak on a long term contract basis and undertakes design and build projects for the water and sewerage sector.

In June 2005, Weida Works Sdn Bhd (WWSB) a wholly owned subsidiary of Weida entered into a joint venture agreement with Common Towers Technologies Sdn Bhd (CTT), a state backed company, to undertake the design, construction and completion of all telecommunication towers for Sabah State under the Time 2 Cellular Telecommunication Infrastructure Project (T2 Project). The Malaysian Communications and Multimedia Commission (MCMC) has given CTT a Network Facilities Provider (NFP) license until August 2015 which will allow CTT to own or provide network facilities in Sabah. The T2 Project was initiated by the Energy, Water and Communications Ministry for telcos to provide complete coverage in the country with a targeted completion by year 2007. MARC sees the T2 Project as an additional source of income for the Group.

Based on its latest unaudited interim results ended 31 March 2006, Weida registered revenue and profit before tax (PBT) of RM132.2 million and RM14.2 million, an increase of 6.7% and a decrease of 20.7%, respectively year-on-year, attributable to the initial costs of the construction of telecommunication towers. Weida has maintained double digit operating profit margins, with the latest being 10.9% for its interim quarter results ended 31 March 2006 (FYE2005: 14.8%). The dip in operating margins year-on-year is attributed to increases in raw material prices and other production related costs. Over the same period, Weida’s debt equity level stood at 0.2 times with RM17.1 million in total borrowings, which is low considering the capital intensive nature of this industry. Of concern is Weida’s deficit in net operating cash flows which is reflected in the Company’s interim fourth quarter results ended 31 March 2006 from an increase in trade receivables from CTT. The credit risk has however been mitigated by an assignment of rental proceeds (payable by telcos leasing the telecommunication towers) to WWSB.