ALPHA CIRCLE SDN BHD - 2022 |
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| Report ID | 6053890046880 | Popularity | 679 views 173 downloads | |||||
| Report Date | Sep 2022 | Product | ||||||
| Company / Issuer | Alpha Circle Sdn Bhd | Sector | Trading/Services | |||||
| Price (RM) |
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| Rationale |
Rating action MARC Ratings has maintained its ratings on Alpha Circle Sdn Bhd’s outstanding RM80 million Senior Sukuk Musharakah and RM55 million Junior Sukuk Musharakah at BIS and CIS. The senior sukuk’s rating outlook has been maintained at negative. Rationale The rating actions reflect Alpha Circle’s weak financial position to be able to fully meet its remaining sukuk repayments and instead has relied on the indulgence granted by sukukholders to defer shortfalls on the sukuk payments. It had utilised RM15 million in the finance service account (FSA) to partly redeem a senior sukuk payment of RM35 million due on June 23, 2022. The upcoming senior sukuk payment of RM80 million (including the deferred balance payment from June 2022) is due on November 23, 2022. Given the insufficient liquidity as a result of low foreign worker registrations, the company has relied on indulgence granted by sukukholders to defer shortfalls on senior sukuk payments. We note that sukukholders have granted indulgence to Alpha Circle to defer any shortfalls on the senior sukuk obligations until the final maturity date in August 2023. For the junior sukuk of RM55 million, the final maturity will also be deferred from May 2023 to August 2023. Alpha Circle is the funding vehicle of NERS Sdn Bhd. While Alpha Circle's cash flows have seen some recovery following the lifting of pandemic-induced closures, issuance of foreign worker permits is still sharply lower than the pre-pandemic level. During August 2021 to April 2022, NERS recorded a total of 1.3 million foreign worker permit issuances, translating to an average monthly issuance of about 139,000, compared to the forecast of 166,000. Over the near term, the volume of foreign worker permit issuance is expected to increase following the reopening of the Malaysian borders on April 1, 2022. Based on the assumption of monthly permit issuance volume of 130,000, the finance service account (FSA) is projected to have RM40 million by November 2022, which is insufficient to redeem the outstanding sukuk under the programme by the original final maturity date. However, with the extension of the final maturity date to August 2023, the company is projected to be able to fully repay the senior sukuk. Rating outlook The negative outlook highlights Alpha Circle’s insufficient liquidity to meet its remaining sukuk repayments without being granted indulgence for deferment. Downside scenario The rating would be downgraded to default in the event of non-repayment of the sukuk upon the indulgence due date. Key strength
Key risks
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