Medi Innovation Sdn Bhd - 2007

MARC has affirmed the long term rating of Medi Innovation Sdn Bhd’s (MISB) RM100 million Islamic Medium Term Notes Issuance Facility (IMTN facility) at AID and the short and long term ratings of its RM50 million Murabahah Underwritten Notes Issuance Facility/Islamic Medium Term Notes Issuance Facility (MUNIF/IMTN) at MARC-2ID /AID with a Stable Outlook. The ratings of MISB reflect the competitive position of Astique Medical Pte Ltd (AMPL) (formerly known as Aesthetics Medical Pte Ltd), its team of doctors experienced in the field of aesthetic medicine, as well as the positive demand prospects for aesthetics services, underpinned by Singapore’s healthy economic performance and the country’s promotion of medical tourism. However, the ratings are moderated by a decline in AMPL Group’s revenue and profit after tax in the financial year (FY) 2006, and the expiry of the profit guarantee from the sellers of AMPL after FY2007.

MISB, an investment holding company, was incorporated on 17 September 2004 for the sole purpose of acquiring 100% equity interest in AMPL for SGD70 million. The acquisition which was completed in March 2006 was funded by proceeds from the Finance Facilities totalling RM150.0 million that was fully drawn down in the same year. AMPL provides integrated medical non-surgical aesthetic, cosmetic and pharmaceutical services and products through five clinics in Singapore. In 2006, AMPL’s main clinic relocated to larger premises and a rebranding exercise was undertaken to reposition AMPL and to enhance its brand image. The Group also entered into a joint venture with three doctors to open aesthetic clinics in Hong Kong. Two clinics commenced operations in March 2007 while the third and fourth clinics commenced operations in August 2007.

In FY2006, AMPL Group’s revenue registered a 20.5% decline to RM30.0 million (SGD13.0 million) from RM37.7 million (SGD16.4 million) in FY2005. The decline in revenue was a result of the higher priority accorded to relocation, rebranding and overseas expansion initiatives during the year. Correspondingly, the Group’s profit before tax (PBT) fell by 38.1% to RM17.9 million (SGD7.8 million) while profit after tax (PAT) fell by 39.8% to RM14.3 million (SGD6.2 million) in FY2006.

AMPL Group’s PAT of SGD6.2 million in FY2006 fell short of the minimum profit guarantee of SGD10.0 million for FY2006 and FY2007. Any shortfall in actual PAT vis-à-vis the SGD10.0 million guaranteed PAT will be recovered from the stakeholder monies and applied to the redemption of the facilities. The profit guarantee of SGD10.0 million is only valid up to FY2007, after which there is no protection for the remaining tenure of the facility.

MISB’s Consolidated Gearing Ratio (CGR) stood at 1.46 times in FY2006, well below the covenanted level of 3.0 times (for Years 1 and 2). MISB redeemed Tranche 1 of the IMTN facility of RM15.0 million in June 2006, nine months ahead of schedule, on account of its strong internal cash flow generation. Going forward, the capitalisation is expected to improve with the serial redemption of the bonds. Cash flow protection, as measured by MISB’s Finance Service Cover Ratio (FSCR) was strong at 12.25 times in FY2006, well above the minimum 1.50 times that MISB is required to maintain throughout the tenure of the facility.

The outlook reflects the expectation that AMPL will maintain its market position and a credit profile consistent with the current ratings.