Monday, May 05, 2003
MARC has assigned the rating of AID (Single A flat, Islamic Debt) to ABI Malaysia Sdn Bhd’s (ABI) RM80.0 million Al Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS). The rating reflects ABI’s leading position in the manufacture of automotive batteries in Malaysia; existing manufacturing contracts that ensure sustainable demand for its batteries; positive outlook for vehicle sales in Malaysia and the ASEAN region; and an issue structure that promotes scheduled amortization of the BaIDS. These positive factors are, however, moderated by ABI’s current low profit margin and high level of trade financing lines.
ABI is the leading automotive battery manufacturer in Malaysia with about 30% market share of the domestic automotive battery replacement market (REM). Through Century Automotive Products Sdn Bhd (Century), ABI is the major original equipment market (OEM) battery supplier for Proton, Perodua and Ford. In addition, ABI is also the sole supplier of OEM batteries for all KIA vehicles assembled in Malaysia (by the NAZA Group) and one of the four contract manufacturers for a leading international automotive battery manufacturer in Asia.
The implementation of the ASEAN Free Trade Area (AFTA) in 2003 provides a platform for ABI to intensify export programmes to neighbouring countries within the ASEAN region. As one of the only three companies producing calcium-calcium maintenance free batteries in the region, ABI sets to benefit from the preferential import duty tariff under AFTA’s Common Effective Preferential Tariff (CEPT). On the local front, meanwhile, as the only calcium-calcium maintenance free battery manufacturer, ABI is poised to secure new contracts from local OEMs and REMs for this type of battery. In addition, existing manufacturing contracts with Century, DMIB Berhad (DMIB) and the international automotive battery manufacturer would ensure sustainable demand for its batteries.
The growth of the automotive battery industry is directly dependent on the demand for automotive vehicles. In Malaysia, the near-term outlook for the motor industry remains positive, albeit lower car sales in January and February 2003, given the prevailing low interest rates, attractive and varied financing packages and gradual economic recovery. Regionally, the advent of AFTA will encourage competitive pricing for motor vehicles. It is projected that the production of light vehicles in the region will grow at an average of 9.4% annually over the next five years.
ABI’s revenue for the last five years has grown at a compounded annual growth rate of 22.4%. Nevertheless, its operating profit margin has been on a downward trend over the past three years i.e. 18.5% (FY2000), 10.4% (FY2001) and 10.0% (FY2002). This was due to the reduction in selling price as a result of stiffer competition among the battery manufacturers and sales of OEMs supplies (through Century) that generated lower profit margin. ABI’s operating margin, however, was slightly higher than the industry’s average. Going forward, the company expects its margin to reach 20% in the medium-term taking into account contribution from the calcium-calcium maintenance free battery sales.
ABI is the leading automotive battery manufacturer in Malaysia with about 30% market share of the domestic automotive battery replacement market (REM). Through Century Automotive Products Sdn Bhd (Century), ABI is the major original equipment market (OEM) battery supplier for Proton, Perodua and Ford. In addition, ABI is also the sole supplier of OEM batteries for all KIA vehicles assembled in Malaysia (by the NAZA Group) and one of the four contract manufacturers for a leading international automotive battery manufacturer in Asia.
The implementation of the ASEAN Free Trade Area (AFTA) in 2003 provides a platform for ABI to intensify export programmes to neighbouring countries within the ASEAN region. As one of the only three companies producing calcium-calcium maintenance free batteries in the region, ABI sets to benefit from the preferential import duty tariff under AFTA’s Common Effective Preferential Tariff (CEPT). On the local front, meanwhile, as the only calcium-calcium maintenance free battery manufacturer, ABI is poised to secure new contracts from local OEMs and REMs for this type of battery. In addition, existing manufacturing contracts with Century, DMIB Berhad (DMIB) and the international automotive battery manufacturer would ensure sustainable demand for its batteries.
The growth of the automotive battery industry is directly dependent on the demand for automotive vehicles. In Malaysia, the near-term outlook for the motor industry remains positive, albeit lower car sales in January and February 2003, given the prevailing low interest rates, attractive and varied financing packages and gradual economic recovery. Regionally, the advent of AFTA will encourage competitive pricing for motor vehicles. It is projected that the production of light vehicles in the region will grow at an average of 9.4% annually over the next five years.
ABI’s revenue for the last five years has grown at a compounded annual growth rate of 22.4%. Nevertheless, its operating profit margin has been on a downward trend over the past three years i.e. 18.5% (FY2000), 10.4% (FY2001) and 10.0% (FY2002). This was due to the reduction in selling price as a result of stiffer competition among the battery manufacturers and sales of OEMs supplies (through Century) that generated lower profit margin. ABI’s operating margin, however, was slightly higher than the industry’s average. Going forward, the company expects its margin to reach 20% in the medium-term taking into account contribution from the calcium-calcium maintenance free battery sales.