Friday, Mar 12, 2004
MARC International has upgraded the rating of First Global Sukuk Inc.’s Serial Islamic Lease Sukuk Issuance of up to USD368 million from BBB+IS to A-IS, reflecting the improved performance of Kumpulan Guthrie Berhad (Guthrie)’s palm oil operations, which contributed positively to its financial results during the period under review coupled with continued positive contributions from its successful ongoing residential property development projects. The rating is supported by good financial flexibility and anticipated further earnings improvement in the intermediate term resulting from prevailing high CPO prices. Nonetheless, moderating factors to the rating include the cyclical nature of the palm oil industry as well as developments surrounding the political and operating environment in Indonesia.
The SPV’s foreign currency rating has taken into account the economic and political risks of operating in Malaysia and Indonesia, given that all of Guthrie’s assets are located in the two countries and the bulk of its earnings derived therefrom. The importance of palm oil as a source of export proceeds in both countries and foreign investment in Indonesia helps mitigate certain aspects of sovereign risks, particularly interference with exports and nationalization. The global nature of the palm oil trade, meanwhile moderates Guthrie’s exposure to the country risks of Malaysia and Indonesia compared to companies serving solely domestic markets.
As at December 2003, both Guthrie’s Malaysian and Indonesian plantation operations exhibited improved performance with higher FFB output and CPO production. Based on its unaudited FY2003 results, the plantation division recorded strong growth of 28.2% and 29.4% in revenue and operating profit respectively mainly boosted by strong CPO prices which averaged at RM1,492 per tonne as compared to RM1,256 per tonne recorded in FY2002.
Both the Malaysian and Indonesian operations contributed rather equally towards total revenue. Going forward, the plantation division is expected to post better results, partly attributable to the Group’s lower-cost based Indonesian operations facilitated by implementation of its best agricultural practices.
Meanwhile, the property development division remains as the Group’s top contributor in terms of operating profit at around 55%. MARC International believes that this division will continue to provide essential diversification to the Group’s earnings base, moving forward. Contribution from the manufacturing division, on the other hand, is not expected to be significant.
Based on FY2003 unaudited results, Guthrie’s gearing position stood at a manageable level of 0.58x, backed by accumulated shareholders’ funds of nearly RM3.1 billion. The Group is expected to continue to pare down its debts based on the retirement schedule of its existing borrowings and the sukuk’s serial redemption. Guthrie’s debt servicing capacity has consequently strengthened in tandem with improved cash flow and profitability results during the fiscal year under review. The Group expects stronger cash flow generation in the intermediate term, driven mainly by favourable CPO prices, higher outputs as well as relatively lower costs of production. The Group continues to possess good financial flexibility with demonstrated access to the capital market, large asset base and strong liquidity. Moving forward, Guthrie expects increasing contributions particularly from the Indonesian operations whilst its holding of substantial and attractive land banks can be considered for disposal if there is a need to supplement its operational cash flow.
The SPV’s foreign currency rating has taken into account the economic and political risks of operating in Malaysia and Indonesia, given that all of Guthrie’s assets are located in the two countries and the bulk of its earnings derived therefrom. The importance of palm oil as a source of export proceeds in both countries and foreign investment in Indonesia helps mitigate certain aspects of sovereign risks, particularly interference with exports and nationalization. The global nature of the palm oil trade, meanwhile moderates Guthrie’s exposure to the country risks of Malaysia and Indonesia compared to companies serving solely domestic markets.
As at December 2003, both Guthrie’s Malaysian and Indonesian plantation operations exhibited improved performance with higher FFB output and CPO production. Based on its unaudited FY2003 results, the plantation division recorded strong growth of 28.2% and 29.4% in revenue and operating profit respectively mainly boosted by strong CPO prices which averaged at RM1,492 per tonne as compared to RM1,256 per tonne recorded in FY2002.
Both the Malaysian and Indonesian operations contributed rather equally towards total revenue. Going forward, the plantation division is expected to post better results, partly attributable to the Group’s lower-cost based Indonesian operations facilitated by implementation of its best agricultural practices.
Meanwhile, the property development division remains as the Group’s top contributor in terms of operating profit at around 55%. MARC International believes that this division will continue to provide essential diversification to the Group’s earnings base, moving forward. Contribution from the manufacturing division, on the other hand, is not expected to be significant.
Based on FY2003 unaudited results, Guthrie’s gearing position stood at a manageable level of 0.58x, backed by accumulated shareholders’ funds of nearly RM3.1 billion. The Group is expected to continue to pare down its debts based on the retirement schedule of its existing borrowings and the sukuk’s serial redemption. Guthrie’s debt servicing capacity has consequently strengthened in tandem with improved cash flow and profitability results during the fiscal year under review. The Group expects stronger cash flow generation in the intermediate term, driven mainly by favourable CPO prices, higher outputs as well as relatively lower costs of production. The Group continues to possess good financial flexibility with demonstrated access to the capital market, large asset base and strong liquidity. Moving forward, Guthrie expects increasing contributions particularly from the Indonesian operations whilst its holding of substantial and attractive land banks can be considered for disposal if there is a need to supplement its operational cash flow.