Friday, Nov 22, 2002
The reaffirmation of Pembinaan Mitrajaya Sdn Bhd’s (PMSB) long term rating of A-ID (A minus, Islamic Debt) and short term rating of MARC 2ID reflect the improvement in economic outlook and the company’s improving financial position and the assignment of contract proceeds and warrants proceeds of PMSB’s public listed holding company for the purpose of the redemption of the ABBA and MUNIF facilities. Moderating factors include continued excess supply in all property sub-sectors, the highly competitive and cyclical nature of the construction industry, the sensitivity of the company’s cash flow to minor adverse developments and the company’s limited financial flexibility.
While the economic outlook continues to improve, MARC expects construction activities to be driven mainly by the public sector through the revival of infrastructure and utility projects. Private sector investments into the construction sector would be confined to residential property sub-sector with limited investments into the office and commercial sub-sectors, which are currently facing an overhang problem. Competition is thus expected to remain intense with margins squeezed in the process.
PMSB’s core businesses are primarily in the civil engineering and construction sectors. Its outstanding order book as at June 2002 stood at RM554.10 million, a large portion of which are government related projects.
PMSB’s contracted works under packages 3/2 and 7A of the Simpang Pulai-Kuala Berang highway are proceeding satisfactorily. The stage of completion of package 3/2 was 64.96% at end February 2002, slightly ahead of schedule. Package 7A was 88.30% completed at end March 2002, slightly ahead of schedule. The Public Works Department’s payment track record continues to be good with no significant delays in payments.
Construction work for the housing development project in Puchong is satisfactory with 77.88% of the work already completed. Progress payment from Primaharta Development Sdn Bhd (PDSB) is considered average with approximately 67% of progress billings paid to PMSB. Nevertheless, payment risk is mitigated given that the management control of PDSB rests with Mitrajaya Holding Bhd (MHB), the parent of PMSB.
Revenue rose a mere 1.89% in FY2001 due to the lack of new contracts from the last two years. Revenue growth in FY2000 was largely skewed by inclusion of revenue from variation orders for projects already completed in FY99. Other factors leading to the decline in profit margin to 6.62% in FY2002 include under provision of construction costs of previously completed projects and bad debt written off for a project which was treated as construction cost. Cash flow coverage ratios although weak, have improved from a deficit position as on-lending to PDSB to fund the project has been reduced. While adequate for the rating category, its projected cash flow is sensitive to minor adverse developments. The assignment of contract proceeds accord some level of protection to bondholders. The shareholders’ funds declined slightly by 1.35% due to higher dividend pay-out and increased debt leverage to 1.88x in FY01 (FY2000: 1.65x). This is still within the cap of 4.0x imposed under the issue structure.
While the economic outlook continues to improve, MARC expects construction activities to be driven mainly by the public sector through the revival of infrastructure and utility projects. Private sector investments into the construction sector would be confined to residential property sub-sector with limited investments into the office and commercial sub-sectors, which are currently facing an overhang problem. Competition is thus expected to remain intense with margins squeezed in the process.
PMSB’s core businesses are primarily in the civil engineering and construction sectors. Its outstanding order book as at June 2002 stood at RM554.10 million, a large portion of which are government related projects.
PMSB’s contracted works under packages 3/2 and 7A of the Simpang Pulai-Kuala Berang highway are proceeding satisfactorily. The stage of completion of package 3/2 was 64.96% at end February 2002, slightly ahead of schedule. Package 7A was 88.30% completed at end March 2002, slightly ahead of schedule. The Public Works Department’s payment track record continues to be good with no significant delays in payments.
Construction work for the housing development project in Puchong is satisfactory with 77.88% of the work already completed. Progress payment from Primaharta Development Sdn Bhd (PDSB) is considered average with approximately 67% of progress billings paid to PMSB. Nevertheless, payment risk is mitigated given that the management control of PDSB rests with Mitrajaya Holding Bhd (MHB), the parent of PMSB.
Revenue rose a mere 1.89% in FY2001 due to the lack of new contracts from the last two years. Revenue growth in FY2000 was largely skewed by inclusion of revenue from variation orders for projects already completed in FY99. Other factors leading to the decline in profit margin to 6.62% in FY2002 include under provision of construction costs of previously completed projects and bad debt written off for a project which was treated as construction cost. Cash flow coverage ratios although weak, have improved from a deficit position as on-lending to PDSB to fund the project has been reduced. While adequate for the rating category, its projected cash flow is sensitive to minor adverse developments. The assignment of contract proceeds accord some level of protection to bondholders. The shareholders’ funds declined slightly by 1.35% due to higher dividend pay-out and increased debt leverage to 1.88x in FY01 (FY2000: 1.65x). This is still within the cap of 4.0x imposed under the issue structure.