MARC has assigned ratings of AAA(bg)/MARC-1(bg) and AA+(bg)/MARC-1(bg) to Legolas Capital Sdn Bhd’s (LCSB) RM105 million nominal value CP/MTNs and RM110 million nominal value CP/MTNs, respectively, underpinned by the irrevocable guarantees provided by Malayan Banking Berhad (Maybank) and United Overseas Bank (Malaysia) Bhd (UOBM) respectively. LCSB is a special purpose vehicle which is an 85.1% owned subsidiary of Ireka Sdn Bhd (ISB), which in turn, is wholly owned by public listed Ireka Corporation Bhd (ICB). The remaining 14.9% in LCSB is owned by MCDF Investment Pte Ltd, a company incorporated in Singapore. On a stand alone basis, ICB is vulnerable to adverse developments due to thin margins from its construction division and high debt levels. However proceeds from the sale of Ireka Hotels Sdn Bhd (IHSB) are expected to enhance ICB’s financial profile going forward, through the repayment of borrowings and enhancement of working capital.

The AAA(bg)/MARC-1(bg) and AA+(bg)/MARC-1(bg) ratings for the CP/MTNs issue reflect the irrevocable guarantee provided by Maybank and UOBM respectively. Maybank’s financial strength reflects its strong dominant position in the domestic market and sound financial profile, underpinned by improving loan quality and sturdy capitalization. UOBM on the other hand, has the largest network of branches in Malaysia. It is wholly owned by United Overseas Bank Limited, Singapore, the second largest bank in the republic.

Following the recent disposal of Ireka Hotels Sdn Bhd (IHSB), ICB is now principally involved in construction, property development and e-commerce through its subsidiary companies. The largest contributor to revenue remains its construction and property divisions. As at 31 January 2007, the construction division’s order book stood at RM750.0 million, comprising mainly domestic projects, which are mainly derived from its property development division. Challenges faced by management and the important factors driving the credit profile of ICB would be the ability to replenish their construction book order and to maintain its competitive edge in offering innovative property developments.

Property development activity is currently concentrated in Mont’ Kiara, Kuala Lumpur. As at 31 March 2007, developments in Mont’ Kiara comprised 78% of ICB’s estimated total gross development value of RM1,125.4 million. ICB’s completed development projects include i-Zen @ Kiara II, i-Zen @ Villa Aseana and Phase 1A Luyang Perdana, Kota Kinabalu. Amongst ICB’s current property development projects, Tiffani by i-Zen and ONE Mont’ Kiara in Mont’ Kiara are both in collaboration with CapitaLand Ltd (Singapore).

On 10 January 2007, ICB’s disposal of its entire shareholding stake in IHSB, which owns The Westin Hotel in Kuala Lumpur, to Newood Assets Limited was completed. The sale was transacted at RM455 million, out of which, RM237 million was used to retire borrowings.

On 5 April 2007, ICB disposed its entire shareholdings in Ireka Land Sdn Bhd and ICSD Ventures Sdn Bhd to Aseana Properties Ltd (APL), an investment holding company listed on the London Stock Exchange (LSE). ICB is expected to hold an approximately 20% shareholding interest in APL.



ICB posted lower revenue in FYE2006 year on year, attributed to the lower volume of construction works completed, whilst higher construction costs affected the Group’s profitability. For the three quarters ended 31 December 2006, ICB registered an unaudited loss before tax of RM19.4 million on the back of RM254.3 million revenue, mainly reflecting weaker performance on the part of its construction and hotel and leisure divisions. The Group’s leverage, as measured by its debt to equity ratio, rose to 4.0 times in FYE2006 (FY2005: 3.69 times) before the disposal of IHSB, following which, the group’s gearing level decreased to 2.3 times.