Monday, Mar 01, 2004
MARC has assigned a rating of A-(A minus) to Bintang Bulk Mover Sdn Bhd’s (BBM) RM50 million 5-year secured serial bonds. The rating reflects BBM’s significant participation in the cement transportation industry by virtue of its long term cement transportation contracts with Lafarge Malayan Cement Bhd (LMCB), the largest local cement manufacturer. Under the issue structure, all revenue from the said contracts will be assigned to the Facility as the primary source of repayment of the bonds. The rating is, however, moderated by BBM’s exposure to the cyclicality inherent in the cement industry and the intense competition within the general haulage industry.
While BBM’s activities include containerized haulage services, transportation of building materials and motor vehicles transportation, its cement transportation business (particularly contracts with LMCB) is the largest revenue contributor at approximately 62.0% of total revenue. Historical revenue has grown at a four-year compounded annual growth rate of 30.7% with operating margin averaging 13.4% in the last five fiscal years. Ancillary income is derived from BBM’s haulage activities, namely its inland container haulage services and freight forwarding services. This business segment holds growth prospects with the advent of the Asean Free Trade Agreement (AFTA) and BBM’s continued drive to expand its scope of haulage services.
BBM’s extensive fleet of tankers, prime movers and trucks makes it one of the largest second tier haulier in the country. Operations are supported by several operation centres spread across West Malaysia which provide logistical support and marketing services. With its niche position in the transportation of bulk cement and proven track record of reliability and efficiency, BBM is in a strong position to compete effectively in the intensely competitive domestic haulage industry.
BBM’s historical debt leverage position has hovered around 1.2 times over the past four fiscal years. Upon the issuance of the bonds, its pro-forma debt-equity is expected to be 1.6 times and this will be progressively reduced over the tenure of the bonds.
The company’s cash flow protection measures reflect an adequate debt servicing capacity. Supporting the cash flow is the revenue from cement transportation contracts with LMCB. Further liquidity protection is accorded to bondholders through the maintenance of a pre-funded sum equivalent to one coupon payment coupled with the build-up requirement of funds for the next coupon payment in a designated account. Principal redemption risk is addressed by a build-up of funds in the sinking fund account twelve months prior to the scheduled redemption dates. The required redemption amount shall be in the sinking fund account at least three months before the relevant maturity dates of the bonds.
While BBM’s activities include containerized haulage services, transportation of building materials and motor vehicles transportation, its cement transportation business (particularly contracts with LMCB) is the largest revenue contributor at approximately 62.0% of total revenue. Historical revenue has grown at a four-year compounded annual growth rate of 30.7% with operating margin averaging 13.4% in the last five fiscal years. Ancillary income is derived from BBM’s haulage activities, namely its inland container haulage services and freight forwarding services. This business segment holds growth prospects with the advent of the Asean Free Trade Agreement (AFTA) and BBM’s continued drive to expand its scope of haulage services.
BBM’s extensive fleet of tankers, prime movers and trucks makes it one of the largest second tier haulier in the country. Operations are supported by several operation centres spread across West Malaysia which provide logistical support and marketing services. With its niche position in the transportation of bulk cement and proven track record of reliability and efficiency, BBM is in a strong position to compete effectively in the intensely competitive domestic haulage industry.
BBM’s historical debt leverage position has hovered around 1.2 times over the past four fiscal years. Upon the issuance of the bonds, its pro-forma debt-equity is expected to be 1.6 times and this will be progressively reduced over the tenure of the bonds.
The company’s cash flow protection measures reflect an adequate debt servicing capacity. Supporting the cash flow is the revenue from cement transportation contracts with LMCB. Further liquidity protection is accorded to bondholders through the maintenance of a pre-funded sum equivalent to one coupon payment coupled with the build-up requirement of funds for the next coupon payment in a designated account. Principal redemption risk is addressed by a build-up of funds in the sinking fund account twelve months prior to the scheduled redemption dates. The required redemption amount shall be in the sinking fund account at least three months before the relevant maturity dates of the bonds.