MARC has affirmed the ratings of AAAIS and AA+IS to IJN Capital Sdn Bhd’s (IJNC) RM100 million Sukuk Musyarakah with maturities of seven (7) years or less from the date of first issue and RM109 million with maturities of more than seven (7) years from the date of first issue, respectively with Stable Outlook. The ratings stem from IJN’s position as one of the leading cardiac centres in Malaysia, Asean and the Asia-Pacific region. In addition, the AAA Sukuks are backed by receivables from the Government; a specified percentage of which will be swept to a Specific Revenue Reserve Account. Proceeds from the issuance will be utilised for the refurbishment and improvement works on IJN’s existing hospital building and construction of a new hospital block adjacent to the existing building, including purchase of medical and non-medical equipment to be commissioned.

Formed in 1992, IJN is dedicated to serving the needs of heart patients by providing cardiology, paediatric cardiology and cardiothoracic surgery services for both adult and paediatric cases. Over the past 13 years in operation, IJN has seen a total of 1,067,574 outpatients and 120,407 inpatients. During the same period, IJN performed over 32,332 surgeries – open heart, closed heart and thoracic surgeries and conducted over 70,312 interventional cardiology procedures.

The decrease in revenue for FY2005 by 13% as compared to FY2004 was mainly due to the change in financial year end from 31 August to 31 December, which resulted in recognition of 16 month results for FY2004 against a 12 months result for FY2005.

If the company’s comparable 12 months result of FY2004 was taken as a benchmark, the revenue in FY2005 improved significantly by 16%. The increase was attributable to the increase in number of patients with 142,333 patients being treated during the year compared to 131,198 in the previous year. The operating margin however has reduced as the company posted a margin of 9.7% compared to 13%, based on the comparable 12 months results of FY2004. IJN’s fee structure is regulated under a Corporatisation Agreement with the Government of Malaysia. This and the increased cost of providing services in tandem with inflationary pressure have contributed to the decline in the operating margin.

IJN’s net cash flow from operation showed significant improvement of 12% in year 2005 compared to the 16 month’s results of FY2004. The improvement was mainly due to the positive changes in working capital aided by cash inflow from trade receivables. During the year, the company managed to improve collections by RM9 million against RM6 million in the previous year. The cash flow position was also further strengthened by the company’s strong cash and bank balances and marketable securities amounting to RM138 million and RM38 million respectively.

IJN has been debt free for the last five years in review. With the Sukuk issuance, The company’s debt leverage is expected to approximate at 1x based on the FY2005 results. No further borrowings are expected to be undertaken by the company during the tenure of the bonds. MARC also draws comfort from the company’s strong liquidity position.

IJN’s future prospects remain positive with the resilient outlook of the healthcare sector. With the much awaited expansion of the hospital which is due to be completed in year 2008 as well as further allocation of funds for the healthcare sector from the 9th Malaysia Plan, IJN is expected to benefit positively from these developments.