Monday, Jan 12, 2004
MARC has assigned a long-term rating of A ID (Single A Flat Islamic Debt) on Merbok Hilir Berhad’s (Merbok) proposed RM150 million Al-Bai’ Bithaman Ajil Serial Bonds (BBA Bonds). Factors underpinning the rating include Merbok 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, moderating factors include the inherent risks of such commodity-based industry, high capital requirements driven by rapidly evolving technology and price competition of the manufactured products.
Merbok Group is considered one of the world`s largest manufacturer of rubberwood MDF and the 3rd largest producer of MDF in Asia-Pacific. With an annual-rated production capacity presently at 450,000m3, 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.
In fiscal 2002, overall sales increased by 13.7% to RM264.2 million from RM232.4 million previously. Merbok’s profitability, however, declined by 10% and 14% at pre and post-tax level respectively, mainly due to substantially higher financing and depreciation costs. Going forward, the Group expects to record higher sales, boosted by additional capacity from its particleboard plant and overseas/Sri Lankan operations.
MARC views the company’s well-capitalised balance sheet positively. Retained earnings have consistently grown over the years, which nearly tripled in four years to RM146 million in FY2002 (FY98: RM54 million). Merbok had geared up in FY2002 to cater for the acquisition of the particleboard factory and installation and commissioning of its own resin manufacturing facility, both located in Kedah as well as the plant expansion involving a second production line of its MDF manufacturing facility in Horana, Sri Lanka. Based on the FY2002 shareholders funds of RM226 million, its pro-forma gearing ratio will rise to around 0.9 times upon the issuance of the RM150 million BBA Bonds. A maximum debt-equity level 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 3rd largest producer of MDF in Asia-Pacific. With an annual-rated production capacity presently at 450,000m3, 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.
In fiscal 2002, overall sales increased by 13.7% to RM264.2 million from RM232.4 million previously. Merbok’s profitability, however, declined by 10% and 14% at pre and post-tax level respectively, mainly due to substantially higher financing and depreciation costs. Going forward, the Group expects to record higher sales, boosted by additional capacity from its particleboard plant and overseas/Sri Lankan operations.
MARC views the company’s well-capitalised balance sheet positively. Retained earnings have consistently grown over the years, which nearly tripled in four years to RM146 million in FY2002 (FY98: RM54 million). Merbok had geared up in FY2002 to cater for the acquisition of the particleboard factory and installation and commissioning of its own resin manufacturing facility, both located in Kedah as well as the plant expansion involving a second production line of its MDF manufacturing facility in Horana, Sri Lanka. Based on the FY2002 shareholders funds of RM226 million, its pro-forma gearing ratio will rise to around 0.9 times upon the issuance of the RM150 million BBA Bonds. A maximum debt-equity level of 1.75 times has been imposed under the issue structure.