Friday, Nov 21, 2003
MARC has assigned long term and short term ratings of A ID (Single A Flat Islamic Debt) and MARC-2 ID respectively on Evermaster Group Berhad’s (EGB) proposed RM90 million Islamic Debt Securities (comprising RM50 million Al-Bai Bithaman Ajil Islamic Debt Securities (BaIDS) and RM40 million Murabahah Multi-Option Notes Issuance (MONI) Facilities). The rating reflects EGB’s expanding activities into government-related construction works, its high operational integration and increasing focus on downstream higher value-add products with regard to the wood-based activities. Other positives include the company’s long operating track record and financial performance, particularly in terms of protecting profit margins despite the challenging economic environment. Moderating factor to the rating is the Group’s vulnerability to cyclical developments characterised by the timber/wood-based industry.
Incorporated in 1996, EGB is listed on the main board of the KLSE. The Group’s principal activity is manufacturing and sale of processed wood products (primarily plywood and moulded timber products) and recently venturing into federal government-backed construction projects. Its manufacturing plant is located in Keningau, Kota Kinabalu, Sabah.
The Group’s current production capacity is around 54,000 cubic metres per annum. Raw materials supply, particularly logs, is ensured through a long term agreement with an incumbent supplier/timber concessionaire company, which entails a minimum supply of around 50,000 cubic metres per annum. The high level of plant integration gives EGB greater flexibility and control over the conversion process from raw material into manufactured end-products. Marketed under the “Green Frog” trademark and through KOMO S.K.H. certification of product quality assurance guaranteed by Verzekerd Keur of Netherlands BV, EGB is able to command higher premium for its plywood and moulded products respectively when compared to normal market prices.
The issue structure incorporates, among others, a Commodity Reserve Account mechanism, whereby 50% of any surplus net operational cash flow in a year (as compared to original projected figures) will be swept into this account, providing an added liquidity buffer to cover the market risks associated with timber products. Refinancing risk under the payment structure is mitigated through the serial nature of the facilities coupled with the creation of Sinking Funds, which must have a credit balance of at least 50% of the outstanding facilities’ amount, six months prior to the due date(s) of the facilities. Liquidity risk is mitigated through the maintenance of a secondary note liquidity buffer in the Finance Service Reserve Accounts.
In fiscal 2003, albeit reduction in revenue by 23% to just around RM50 million mainly as a result of insufficient working capital, EGB managed to maintain its double digit operating profit margin at 14.3%. Its operating margin averaged 16.7% over the last five financial years. Debt to equity level stood at a low 0.38 times but is expected to rise to 0.78 times with the issuance of the proposed RM90 million Islamic Debt Securities. A maximum debt leverage of 1.25 times has been imposed under the issue structure. Cashflow protection measures have improved and comparable to its other rated peers and moving forward, will be bolstered by increasing contribution from its expanding construction activities.
Incorporated in 1996, EGB is listed on the main board of the KLSE. The Group’s principal activity is manufacturing and sale of processed wood products (primarily plywood and moulded timber products) and recently venturing into federal government-backed construction projects. Its manufacturing plant is located in Keningau, Kota Kinabalu, Sabah.
The Group’s current production capacity is around 54,000 cubic metres per annum. Raw materials supply, particularly logs, is ensured through a long term agreement with an incumbent supplier/timber concessionaire company, which entails a minimum supply of around 50,000 cubic metres per annum. The high level of plant integration gives EGB greater flexibility and control over the conversion process from raw material into manufactured end-products. Marketed under the “Green Frog” trademark and through KOMO S.K.H. certification of product quality assurance guaranteed by Verzekerd Keur of Netherlands BV, EGB is able to command higher premium for its plywood and moulded products respectively when compared to normal market prices.
The issue structure incorporates, among others, a Commodity Reserve Account mechanism, whereby 50% of any surplus net operational cash flow in a year (as compared to original projected figures) will be swept into this account, providing an added liquidity buffer to cover the market risks associated with timber products. Refinancing risk under the payment structure is mitigated through the serial nature of the facilities coupled with the creation of Sinking Funds, which must have a credit balance of at least 50% of the outstanding facilities’ amount, six months prior to the due date(s) of the facilities. Liquidity risk is mitigated through the maintenance of a secondary note liquidity buffer in the Finance Service Reserve Accounts.
In fiscal 2003, albeit reduction in revenue by 23% to just around RM50 million mainly as a result of insufficient working capital, EGB managed to maintain its double digit operating profit margin at 14.3%. Its operating margin averaged 16.7% over the last five financial years. Debt to equity level stood at a low 0.38 times but is expected to rise to 0.78 times with the issuance of the proposed RM90 million Islamic Debt Securities. A maximum debt leverage of 1.25 times has been imposed under the issue structure. Cashflow protection measures have improved and comparable to its other rated peers and moving forward, will be bolstered by increasing contribution from its expanding construction activities.