Monday, Jan 24, 2005
The affirmation of the AID rating assigned to Merbok Hilir Berhad’s (Merbok) RM150.0 million Al-Bai’ Bithaman Ajil Serial Bonds (BBA Bonds) is premised on the Group’s proven track record in the highly competitive MDF industry; the favourable outlook of the international Medium Density Board (MDF) industry, as well as its well-capitalised balance-sheet. However, the balancing factors taken into consideration include the inherent risks of such commodity-based industry, high capital requirements driven by rapidly evolving technology and price competition of the manufactured products. Proceeds from the BBA Bonds were utilised for the repayment of borrowings and working capital purposes.
Merbok Group is considered one of the world`s largest manufacturer of rubberwood MDF and the third largest producer of MDF in Asia-Pacific. With an annual-rated production capacity presently at 530,000m3, the Group is also the largest MDF manufacturer in South East Asia, representing 25% of Malaysian capacity and 6.5% of the Asia Pacific regional production capacity. The Group`s production facilities are located in Kedah (Merbok and Bukit Selambau factories), in Johor (Pasir Gudang factory) and in Sri Lanka (Horana factory).
Sales of the Group`s products are co-ordinated through its sales and marketing team based in Penang, Malaysia. The Group distributes its products internationally through a network of agents and distributors. The Group’s products are primarily exported to the Middle East (40%), China/Taiwan/Hong Kong (20%), and Korea, Japan and South East Asia (15%). The Malaysian home market absorbs around 15% of the Group’s output while the balance is exported to other international markets.
For the first 9-months of 2004, despite higher revenue contribution, the Group’s profitability declined due to losses from its Sri Lanka operations, Malaysian particleboard operations as well as a general increase in raw material costs. Going forward, Merbok projects that it will be able to turn around the negative results of its loss making division by 2005. In respect of MDF market prices for 2005, the Group anticipates a further strengthening of MDF sales prices by US$5-10 per m3, partially because of the growing imbalance in demand/supply of MDF and partially as a cost push inflation aspect to be charged to customers.
MARC views the company’s well-capitalised balance sheet positively. Retained earnings have consistently grown over the years. As expected, debt leverage increased to 1.11 times (0.94 times previously) upon the issuance of the RM150 million BBA Bonds. A maximum debt-equity cap of 1.75 times has been imposed under the issue structure.
Merbok Group is considered one of the world`s largest manufacturer of rubberwood MDF and the third largest producer of MDF in Asia-Pacific. With an annual-rated production capacity presently at 530,000m3, the Group is also the largest MDF manufacturer in South East Asia, representing 25% of Malaysian capacity and 6.5% of the Asia Pacific regional production capacity. The Group`s production facilities are located in Kedah (Merbok and Bukit Selambau factories), in Johor (Pasir Gudang factory) and in Sri Lanka (Horana factory).
Sales of the Group`s products are co-ordinated through its sales and marketing team based in Penang, Malaysia. The Group distributes its products internationally through a network of agents and distributors. The Group’s products are primarily exported to the Middle East (40%), China/Taiwan/Hong Kong (20%), and Korea, Japan and South East Asia (15%). The Malaysian home market absorbs around 15% of the Group’s output while the balance is exported to other international markets.
For the first 9-months of 2004, despite higher revenue contribution, the Group’s profitability declined due to losses from its Sri Lanka operations, Malaysian particleboard operations as well as a general increase in raw material costs. Going forward, Merbok projects that it will be able to turn around the negative results of its loss making division by 2005. In respect of MDF market prices for 2005, the Group anticipates a further strengthening of MDF sales prices by US$5-10 per m3, partially because of the growing imbalance in demand/supply of MDF and partially as a cost push inflation aspect to be charged to customers.
MARC views the company’s well-capitalised balance sheet positively. Retained earnings have consistently grown over the years. As expected, debt leverage increased to 1.11 times (0.94 times previously) upon the issuance of the RM150 million BBA Bonds. A maximum debt-equity cap of 1.75 times has been imposed under the issue structure.