Friday, Nov 05, 2004
The short- and long-term ratings of MARC-2ID and A ID for LEADER’s proposed private debt securities reflects the Group’s position in the cables and wires manufacturing industry as well as the stable revenue arising from its power generation business in Cambodia. Moderating factors include the low margins of its cable and wire products, and the Group’s relatively high debt-leverage at present.
LEADER leads the country`s wire and cable industry, with revenue in excess of RM1 billion every year. In the domestic market, several major projects that have been planned such as the Bakun Hydroelectric Dam, Tanjung Bin power plant, East Coast Highway and other major power plants and industrial development projects may require LEADER’s expertise and capability in supplying the cables.
In the international arena, with its expertise and experience, the Group has successfully penetrated the export market, exporting to more than 30 countries worldwide. LEADER currently exports more than 30% of its products.
The Group’s power generation unit, Cambodia Utilities Pte Ltd was incorporated in 1994 to develop on a Build-Operate-Transfer basis a 35MW diesel engine heavy-fuel oil fired power generating plant under the Independent Power Producer scheme in Cambodia. The electricity generated by CUPL is sold to Electricite du Cambodge (EDC), a department of the Ministry of Industry, Mines and Energy (MIME) of the Government Kingdom of Cambodia. The contract is valid for 18 years (beginning 1997) and is on a ‘take or pay’ basis. Since 1997, CUPL has been a major contributor to the Group’s bottom line and is expected to continue in the near-to-medium-term.
In FY2003, revenue for the Group was RM1,009.2 million. Meanwhile, the pre-tax loss was mainly due to allowances amounting to RM117.8 million in respect of write-off of investment in an associated company, allowances / impairment in relation to operating assets, cessation / wind down of operations of subsidiaries and payment of retrenchment benefits / VSS. LEADER does not expect such write-offs to recur. Excluding the write-offs, the Group would have registered a pre-tax profit of RM25.63 million in FY2003.
The Group’s liquidity is adequate as reflected by the improvement in its cash conversion cycle to 142 days from 151 days previously. Debt-servicing as reflected by CFO interest coverage is healthy, averaging at 4.01 times over the past 4 years. Going forward, LEADER is expected to be able to comfortably meet its debt obligation barring any unforeseen circumstances.
Given that the bulk of the PDS will be utilised for refinancing, the pro-forma debt leverage at 1.28 times is close to the current leverage position. Meanwhile, LEADER has not projected any further debts to be incurred between 2004-2011. As such, debt leverage is expected to steadily reduce with the repayment of the PDS. However, should LEADER decide to undertake further debts, debt leverage is limited to a maximum of 1.30 times under the issue structure.
LEADER leads the country`s wire and cable industry, with revenue in excess of RM1 billion every year. In the domestic market, several major projects that have been planned such as the Bakun Hydroelectric Dam, Tanjung Bin power plant, East Coast Highway and other major power plants and industrial development projects may require LEADER’s expertise and capability in supplying the cables.
In the international arena, with its expertise and experience, the Group has successfully penetrated the export market, exporting to more than 30 countries worldwide. LEADER currently exports more than 30% of its products.
The Group’s power generation unit, Cambodia Utilities Pte Ltd was incorporated in 1994 to develop on a Build-Operate-Transfer basis a 35MW diesel engine heavy-fuel oil fired power generating plant under the Independent Power Producer scheme in Cambodia. The electricity generated by CUPL is sold to Electricite du Cambodge (EDC), a department of the Ministry of Industry, Mines and Energy (MIME) of the Government Kingdom of Cambodia. The contract is valid for 18 years (beginning 1997) and is on a ‘take or pay’ basis. Since 1997, CUPL has been a major contributor to the Group’s bottom line and is expected to continue in the near-to-medium-term.
In FY2003, revenue for the Group was RM1,009.2 million. Meanwhile, the pre-tax loss was mainly due to allowances amounting to RM117.8 million in respect of write-off of investment in an associated company, allowances / impairment in relation to operating assets, cessation / wind down of operations of subsidiaries and payment of retrenchment benefits / VSS. LEADER does not expect such write-offs to recur. Excluding the write-offs, the Group would have registered a pre-tax profit of RM25.63 million in FY2003.
The Group’s liquidity is adequate as reflected by the improvement in its cash conversion cycle to 142 days from 151 days previously. Debt-servicing as reflected by CFO interest coverage is healthy, averaging at 4.01 times over the past 4 years. Going forward, LEADER is expected to be able to comfortably meet its debt obligation barring any unforeseen circumstances.
Given that the bulk of the PDS will be utilised for refinancing, the pro-forma debt leverage at 1.28 times is close to the current leverage position. Meanwhile, LEADER has not projected any further debts to be incurred between 2004-2011. As such, debt leverage is expected to steadily reduce with the repayment of the PDS. However, should LEADER decide to undertake further debts, debt leverage is limited to a maximum of 1.30 times under the issue structure.