Pembinaan Mitrajaya Sdn Bhd - 2007

MARC has downgraded the short term rating of Pembinaan Mitrajaya Sdn Bhd’s (PMSB) RM50 million Murabahah Multi-Option Notes Issuance (MONI) Facility from MARC-2ID to MARC-3ID. The downgrade reflects rating concerns arising from developments with respect to ABRAR Discounts Berhad, the principal underwriter of the MONI facility. Rating concerns primarily include increased refinancing risk as a result of lumpy and accelerated maturity of the notes which indicate a credit profile more reflective of the lower rating, notwithstanding an irrevocable and unconditional Corporate Guarantee provided by Mitrajaya Holdings Berhad (MHB). The Company is planning to refinance its MONI facility via bank credit lines. Concurrently MARC has withdrawn its long term rating of A-ID  (A minus, Islamic Debt) on the issue as there are no long term papers issued under the facility, which has been scaled down to RM40 million.

Following negotiations with Prokhas Sdn Bhd (Prokhas), the Company appointed by Bank Negara Malaysia to manage the affairs of ABRAR, PMSB has been compelled to reduce the facility limit by RM10 million to RM40 million and fully redeem the entire facility by July 2007. Consequently, PMSB’s liquidity position has been severely affected, increasing the urgency for immediate refinancing options to be put in place. The company is however in the midst of advanced negotiations with its bankers to put in place credit lines to meet the refinancing deadline as well as its working capital requirements and has also identified funds to be generated internally to meet any shortfalls. 

PMSB is the construction arm of the MHB Group and continues to be a major revenue contributor to the MHB group. As at December 2006, PMSB had an outstanding order book of RM370.0 million. In FY2005, PMSB returned to profitability with a pre tax profit of RM2.1 million, but its 12 months unaudited results ended 31 December 2006 reflect a decrease of 12.8% to RM1.9 million. The lower profit was attributable to lower recognition of income arising from tail end projects carried forward from 2005. To date, the drawn down amount of the facility stands at RM40 million and the company’s debt leverage level as per its unaudited  FY2006 results, which comprises short term facilities, stood at 1.5 times.

MHB, which has provided a corporate guarantee for the issue, has exhibited its resilience as a contractor via PMSB, having replenished its order book of which approximately 67% comprises Government related projects. MHB’s total order book as at December 2006 stood at RM546.1 million which is adequate to sustain the Group for the next two years. Additionally, the Group’s construction division has been able to maintain its operating profit margins despite the recent weakness in the construction sector.

At the Group level, MHB, based on its 12 months unaudited results ended 31 December 2006, registered a 2.6% decline in revenue to RM269.8 million and a 13.3% decline in profit before tax to RM15.4 million, due to lower revenue contributions from its construction and quarry and premix operations. Going forward, the significant revenue contributions from the Group’s South African operations are expected to continue while the encouraging number of secured projects under the 9MP should further bolster group revenue.