Bintang Bulk Mover Sdn Bhd - 2007

MARC has reaffirmed its A- rating of Bintang Bulk Mover Sdn Bhd (BBM or the Group) with respect to its RM50 million 5-year secured serial bonds. The rating outlook is stable. The reaffirmed rating reflects BBM’s growing revenue base supported by cement transportation and container haulage businesses and its venture into complementary businesses such as warehousing. Moderating factors include the cyclical developments affecting the cement industry as well as intense competition within the haulage industry. 

BBM’s extensive fleet of 692 prime movers and 1,281 trailers has positioned the Group as one of the largest local second-tier haulier. Daily operations are supported by its operation centres across West Malaysia which provide logistics, technical and marketing support. The Group is well positioned in the local transportation industry with an approximate 6% to 7% market share and is ranked fourth in the container haulage business. Meanwhile, the Group is a leader in cement transportation business with a fleet size of 319 cement tankers at present.

FY2007 saw BBM’s container haulage business as the largest contributor to the Group’s total revenue at 52.3%, attributed to higher business volume and further liberalisation of the domestic haulage industry effective April 2006. The cement transportation business contributed 40.2% while other businesses contributed the balance of 7.5%. In FY2007, the Group’s total revenue increased marginally by 4.7% but pre-tax profit deteriorated by 60% mainly attributed to a 23% hike in diesel price, which was not wholly passed on to its clients. New contracts negotiated with cement producers will offer improved margin stability with the incorporation of fuel adjustment provisions. The cement transportation business, which has long-term contracts with Lafarge Malayan Cement Berhad (LMCB), will continue to support the Group’s revenue and profitability augmented by revenue from its new tipper trailer fleet. The new revenue stream is backed by a contract with LMCB for coal and clinker transportation. This new contract will potentially generate higher margins since consignment entails a chargeable return journey. BBM is also planning to double the scale of its warehouse business in line with its strategy to become a logistics service provider. It has already obtained funds to finance the construction of a new warehouse.

BBM’s CFO interest coverage ratios dropped to 3.12 times in FY2007 (FY2006: 5.23 times) as a result of increased working capital needs from higher receivables and increased interest servicing obligations. Nevertheless, a total of RM3.20 million and RM15.00 million has been accumulated under the Debt Service Reserve Account and Sinking Fund account respectively, providing certainty as to BBM’s ability to meet the next coupon payment and repayment amount in FY2008. Cash flow generation will continue to be supported by its steady income stream from long-term cement transportation contracts, particularly with LMCB.  Notwithstanding the first serial redemption in April 2007, BBM’s company level debt leverage ratio of 1.46 times as at June 2007 provides little headroom vis-à-vis the maximum permitted, which is 1.50 times for 2008 (April) and beyond.

The stable outlook reflects the Group’s revenue and cash flow visibility afforded by its long-term cement transportation contracts with LMCB, which provide the primary source of repayment for the serial bonds.

Strengths

• Diverse transportation and transportation-related businesses which include cement transportation, container haulage and warehousing services;
• Number four container haulage market position domestically;
• Extensive fleet to support its growing business; and
• Long term contracts with Lafarge Malayan Cement Berhad provide revenue visibility

Challenges/ Risks

• Cyclicality of the cement industry; and
• Intense competition within the container haulage industry