Olympia Industries Bhd - 2011 |
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Report ID | 4152 | Popularity | 1602 views 17 downloads | |||||
Report Date | Feb 2012 | Product | ||||||
Company / Issuer | Olympia Industries Bhd | Sector | Trading/Services - Others | |||||
Price (RM) |
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Rationale |
MARC has downgraded the rating of Olympia Industries Berhad’s (Olympia) outstanding RM49,733,635 nominal value Redeemable Unsecured Loan Stocks (RULS) to B+ from BB- and concurrently revised the rating outlook to stable from negative. The rating action reflects Olympia’s continued weak financial performance, in particular its limited cash flow generation ability arising from its weak business profile and its dependence on asset disposals to meet its financial obligations. Olympia has a short-term debt of RM81.3 million including an upcoming redemption of RM10.7 million RULS in April 2012, while its liquidity position as reflected by its cash and cash equivalents stood at RM31.9 million as at September 30, 2011. MARC notes that the slower-than-expected progress of the Kenny Heights Development (KHD) project on a 73-acre site in Kuala Lumpur has weighed on its financial performance. The KHD project, which consists of high-end residential projects and undertaken with a related company, DutaLand Berhad, was expected to provide a major boost to earnings. However, as of date, only one project, consisting of 49 units of four-storey villas with a gross development value of RM216.0 million, was completed and handed over in April 2011, while the first phase of its next project comprising two high-end condominium towers has been delayed from an initial launch date in 1Q2011. MARC notes that a soft launch of one tower of 168 units has only registered a 17% take-up rate, reflecting the weakening market sentiments for the high-end residential segment in the Klang Valley. MARC remains concerned on Olympia’s ability to fund the development given its weak liquidity position and limited financial flexibility. For FY2011, Olympia’s improved pre-tax profit of RM9.1 million (FY2010: -RM5.1 million) after two consecutive years of pre-tax losses was mainly due to lower fair value losses from disposal of marketable securities as compared to previous years. However, for the first quarter ended September 2011 (1QFY2012), MARC notes that the group suffered a sharp pre-tax loss of RM32.1 million (1QFY2011:-RM1.5 million) arising from fair value losses incurred on disposal of marketable securities. MARC notes that Olympia’s liquidity position in FY2011 was largely supported by cash inflows generated from the disposal of marketable securities and land parcels which amounted to RM138.9 million to enable it to meet its financial obligations of RM85.1 million. Given the group’s limited cash flow generating ability, it would need to depend on asset sales to generate liquidity. Among its major assets is Menara Olympia which has a carrying amount of RM228.1 million as at September 5, 2011 and is secured against debts amounting to RM157.1 million, though MARC notes an earlier sale agreement for the building had fallen through. The stable outlook incorporates MARC’s expectations that Olympia will manage timely disposal of assets to meet its future debt obligations. Strengths
Challenges/Risks
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