Monday, Apr 08, 2002
Road Builder (M) Holdings Bhd (RBH)’s corporate credit rating of A+ reflects the group’s strong operating characteristics and favourable competitive position in the construction business, the positive track record of its property and tolling divisions and satisfactory profitability measures and debt leverage. Credit quality is, however, moderated by the inherent cyclicality of the construction and property industries.
Incorporated in 1992, RBH was dormant until it acquired Road Builder (M) Sdn Bhd (RBM) and became an investment holding company. The group’s activities revolve around construction, property development, toll concession, port operation, civil engineering and project management services and hotel and club operation. RBH’s track record in undertaking various construction projects and completing them with quality workmanship and on time, coupled with strong financial resources have placed the group in a firm position to compete effectively in a challenging operating environment. RBH’s growing participation in construction projects outside Malaysia has helped to mitigate the effects of the slowdown in the domestic market. An order book in excess of RM2 billion should adequately sustain the group’s revenue base over the next three years. The property and tolling divisions are also key revenue contributors. The group’s property projects achieved satisfactory sales despite softer demand whilst the tolling division has experienced increasing traffic volume since the Sungai Besi highway opened in 1999. Going forward, additional revenue will be generated by the newly acquired New Pantai Expressway when tolling commences in year 2004.
Growth of the domestic construction industry is expected to remain sluggish in the medium term amidst uncertainties in the economic outlook. Construction activities in the near term will be mainly supported by infrastructure and utility projects as the Government continues to pump prime the economy. Competition will remain intense with the limited number of available projects and the natural repercussion is margin squeeze. The property sector outlook is expected to remain soft with smaller project launches and marginal increases in take-up rates. Supported by the prevailing low interest rate environment, housing priced below RM250,000 will continue to be the catalyst for growth in the property segment. The long term outlook for the property market remains favorable given the new housing demand created by population growth.
RBH’s profitability measures were satisfactory with double-digit levels recorded in the past five years. Revenue declined for three consecutive years up to FY2000 with the completion of several construction projects as well as the effects of a weak property sector, but registered a slight recovery in FY2001. Revenue in the near-to-medium term will be largely supported by its enviable construction order book, continued sales of its property units and tolling income from the Besraya expressway in Sungai Besi.
RBH’s debt leverage has been kept at or below 0.5 times over the past six years supported by a sizeable equity position. The pro-forma debt leverage will increase slightly to 0.6 times from 0.4 times in FY2002 after the issuance of Road Builder (M) Sdn Bhd’s RM400 million income securities. The group’s cash flow ratios reflect the nature of the construction industry where heavy working capital requirement resulted in operating cash flow deficit in the past two years. Generally, the group possesses the cash generation capacity to meet its debt servicing requirement.
The group’s low leverage, growing capital base, its expertise and established track record together accord the group with good financial flexibility.
Incorporated in 1992, RBH was dormant until it acquired Road Builder (M) Sdn Bhd (RBM) and became an investment holding company. The group’s activities revolve around construction, property development, toll concession, port operation, civil engineering and project management services and hotel and club operation. RBH’s track record in undertaking various construction projects and completing them with quality workmanship and on time, coupled with strong financial resources have placed the group in a firm position to compete effectively in a challenging operating environment. RBH’s growing participation in construction projects outside Malaysia has helped to mitigate the effects of the slowdown in the domestic market. An order book in excess of RM2 billion should adequately sustain the group’s revenue base over the next three years. The property and tolling divisions are also key revenue contributors. The group’s property projects achieved satisfactory sales despite softer demand whilst the tolling division has experienced increasing traffic volume since the Sungai Besi highway opened in 1999. Going forward, additional revenue will be generated by the newly acquired New Pantai Expressway when tolling commences in year 2004.
Growth of the domestic construction industry is expected to remain sluggish in the medium term amidst uncertainties in the economic outlook. Construction activities in the near term will be mainly supported by infrastructure and utility projects as the Government continues to pump prime the economy. Competition will remain intense with the limited number of available projects and the natural repercussion is margin squeeze. The property sector outlook is expected to remain soft with smaller project launches and marginal increases in take-up rates. Supported by the prevailing low interest rate environment, housing priced below RM250,000 will continue to be the catalyst for growth in the property segment. The long term outlook for the property market remains favorable given the new housing demand created by population growth.
RBH’s profitability measures were satisfactory with double-digit levels recorded in the past five years. Revenue declined for three consecutive years up to FY2000 with the completion of several construction projects as well as the effects of a weak property sector, but registered a slight recovery in FY2001. Revenue in the near-to-medium term will be largely supported by its enviable construction order book, continued sales of its property units and tolling income from the Besraya expressway in Sungai Besi.
RBH’s debt leverage has been kept at or below 0.5 times over the past six years supported by a sizeable equity position. The pro-forma debt leverage will increase slightly to 0.6 times from 0.4 times in FY2002 after the issuance of Road Builder (M) Sdn Bhd’s RM400 million income securities. The group’s cash flow ratios reflect the nature of the construction industry where heavy working capital requirement resulted in operating cash flow deficit in the past two years. Generally, the group possesses the cash generation capacity to meet its debt servicing requirement.
The group’s low leverage, growing capital base, its expertise and established track record together accord the group with good financial flexibility.