Wednesday, Dec 10, 2003
The rating reflects IJM Plantations Berhad’s (IJMP) business focus in palm oil plantation and milling and its strong plantation performance. The rating is, however, moderated by the Group’s vulnerability to cyclical developments in the palm oil industry.
IJMP’s palm oil cultivation is undertaken in the Sandakan and Labuk-Sugut districts of Sabah. Out of a total land bank of 29,497 hectares, only 77% have been planted, of which 59% bear matured palm oil and 41% immature palm oil plantings. An increased percentage of plantation areas came into production in 2002 and coupled with the improvement in average CPO price to RM1,363.5 per metric tonne (MT) in the said year (2001: RM894.50 per MT), helped pushed the group’s revenue to RM96.84 million from RM47.60 million previously. Sales of crude palm oil are expected to continue driving the Group’s revenue and earnings; exposing its revenue base to cyclical movements in the palm oil price.
Reflective of the well laid infrastructure and effective management of its estates, IJMP recorded an average FFB yield of 26.40 MT per hectare for the second consecutive year; higher than the Sabah state average (20.6), industry average (18.0) and the yields of most of its rated peers. The Group’s average oil extraction rate of 21.7% is above the industry average of 19.9%. Going forward, MARC expects IJMP’s palm oil plantations’ performance to improve further as the estates reach their prime maturity profile. FFB output from the Group’s estates are supplied to its three palm oil mills, with a total processing capacity of 750,000 MT per year.
Besides the maintenance of a six-month liquidity buffer to meet secondary note payments under the ABBA bonds, a sweep mechanism has also been incorporated in the issue structure, whereby 50% of any surplus net operational cash flow in a year (as compared to original projected figures) will be transferred to a Commodity Reserve Account to serve as additional liquidity buffer.
The Group’s financial profile continued to strengthen in 2002, underpinned by improving profitability measures. Going forward, the group’s debt servicing capacity is expected to be at comfortable levels throughout the tenure of the facility. Debt leverage has historically been low, ranging between 0.03x to 0.08x over the past three years. After the full drawdown of the BaIDS, the debt leverage is expected to peak at 0.40x in 2004. Thereafter, it is expected to progressively reduce beginning year 2005 upon the first principal repayment of the bond facility.
IJMP’s palm oil cultivation is undertaken in the Sandakan and Labuk-Sugut districts of Sabah. Out of a total land bank of 29,497 hectares, only 77% have been planted, of which 59% bear matured palm oil and 41% immature palm oil plantings. An increased percentage of plantation areas came into production in 2002 and coupled with the improvement in average CPO price to RM1,363.5 per metric tonne (MT) in the said year (2001: RM894.50 per MT), helped pushed the group’s revenue to RM96.84 million from RM47.60 million previously. Sales of crude palm oil are expected to continue driving the Group’s revenue and earnings; exposing its revenue base to cyclical movements in the palm oil price.
Reflective of the well laid infrastructure and effective management of its estates, IJMP recorded an average FFB yield of 26.40 MT per hectare for the second consecutive year; higher than the Sabah state average (20.6), industry average (18.0) and the yields of most of its rated peers. The Group’s average oil extraction rate of 21.7% is above the industry average of 19.9%. Going forward, MARC expects IJMP’s palm oil plantations’ performance to improve further as the estates reach their prime maturity profile. FFB output from the Group’s estates are supplied to its three palm oil mills, with a total processing capacity of 750,000 MT per year.
Besides the maintenance of a six-month liquidity buffer to meet secondary note payments under the ABBA bonds, a sweep mechanism has also been incorporated in the issue structure, whereby 50% of any surplus net operational cash flow in a year (as compared to original projected figures) will be transferred to a Commodity Reserve Account to serve as additional liquidity buffer.
The Group’s financial profile continued to strengthen in 2002, underpinned by improving profitability measures. Going forward, the group’s debt servicing capacity is expected to be at comfortable levels throughout the tenure of the facility. Debt leverage has historically been low, ranging between 0.03x to 0.08x over the past three years. After the full drawdown of the BaIDS, the debt leverage is expected to peak at 0.40x in 2004. Thereafter, it is expected to progressively reduce beginning year 2005 upon the first principal repayment of the bond facility.