Tuesday, Feb 20, 2001
Malaysian Rating Corporation Berhad (MARC) has assigned a long-term Islamic debt rating of A-ID (A minus, Islamic Debt Security) to Commerce Dot Com Sdn Bhd’s (CDC) RM100 million Al-Istisna facility. The rating reflects Commerce Dot Com Sdn Bhd’s (CDC) position as the exclusive provider of the electronic procurement system for the government and a tight underlying issue structure for the bonds facility. The rating is moderated by the company’s aggressive debt level and unproven future earnings generation.
Under a Concession Contract between the Malaysian Government and CDC in July 1999, CDC was granted the exclusive right to design, implement and operate the government’s electronic procurement services, known as e-Perolehan, for a period of 94 months. CDC is jointly owned by Puncak Semangat Sdn Bhd (PSSB) and NTT Data Corporation (Japan) on the basis of 81:19. PSSB is engaged primarily in the business of information technology and e-commerce while its Japanese partner, NTT, is the largest IT system integrator in Japan and the second largest in the world.
The ePerolehan project represents one of the first and largest pilot applications under the eGovernment Multimedia Super Corridor (MSC) flagship to go live. The ePerolehan system enables the government to conduct through electronic means the procurement of supply and services through central contract, tender, quotation and direct purchase. Project implementation is undertaken in four phases, involving about 3,500 government procurement centres and 28,000 government-registered suppliers.
The main software driving the system was developed in-house based on an e-commerce engine. The 3D catalogue software is provided by NTT Data Corporation, one of CDC’s shareholders. Security of the ePerolehan system is tight, with controls employed to restrict physical access to the data centre, network access, data access and application access.
Over 90% of CDC’s income will be derived from transaction fees, charged at the rate of 0.8% on the value of each completed purchase order, subject to a maximum fee of RM9,600 per order. The fee will be paid by the government upon completion of each purchase transaction. Other income earned by the company are the bi-annual subscription fee of RM300 levied on each registered supplier and catalogue development & hosting fees.
CDC’s cash flow position is expected to be in deficit during the project build or development stage. While payment of secondary bonds due in this stage will be prefunded from the bonds proceeds, an additional liquidity buffer will also be maintained, equivalent to 10% of the amount of the bonds issued. The liquidity buffer can be drawn upon to cover any shortfall in the funding required for the redemption of the secondary and primary bonds over the life of the facility. The cash flow is expected to improve with the appearance of transaction fees after the full operation of the electronic procurement system in January 2003. As a MSC status company, CDC is exempted from corporate tax under the Pioneer Status tax incentive for a period of 10 years.
CDC’s pro-forma debt leverage is aggressive at around 6.5 times, after accounting for the bonds issue and projected fresh equity injection of RM20 million in FY2001. The debt leverage, nevertheless, is expected to be rapidly reduced to 3.50 times, 1.91 times and 1.05 times in FY2002, 2003 and 2004 respectively, reflecting the effect of retained earnings.
Under a Concession Contract between the Malaysian Government and CDC in July 1999, CDC was granted the exclusive right to design, implement and operate the government’s electronic procurement services, known as e-Perolehan, for a period of 94 months. CDC is jointly owned by Puncak Semangat Sdn Bhd (PSSB) and NTT Data Corporation (Japan) on the basis of 81:19. PSSB is engaged primarily in the business of information technology and e-commerce while its Japanese partner, NTT, is the largest IT system integrator in Japan and the second largest in the world.
The ePerolehan project represents one of the first and largest pilot applications under the eGovernment Multimedia Super Corridor (MSC) flagship to go live. The ePerolehan system enables the government to conduct through electronic means the procurement of supply and services through central contract, tender, quotation and direct purchase. Project implementation is undertaken in four phases, involving about 3,500 government procurement centres and 28,000 government-registered suppliers.
The main software driving the system was developed in-house based on an e-commerce engine. The 3D catalogue software is provided by NTT Data Corporation, one of CDC’s shareholders. Security of the ePerolehan system is tight, with controls employed to restrict physical access to the data centre, network access, data access and application access.
Over 90% of CDC’s income will be derived from transaction fees, charged at the rate of 0.8% on the value of each completed purchase order, subject to a maximum fee of RM9,600 per order. The fee will be paid by the government upon completion of each purchase transaction. Other income earned by the company are the bi-annual subscription fee of RM300 levied on each registered supplier and catalogue development & hosting fees.
CDC’s cash flow position is expected to be in deficit during the project build or development stage. While payment of secondary bonds due in this stage will be prefunded from the bonds proceeds, an additional liquidity buffer will also be maintained, equivalent to 10% of the amount of the bonds issued. The liquidity buffer can be drawn upon to cover any shortfall in the funding required for the redemption of the secondary and primary bonds over the life of the facility. The cash flow is expected to improve with the appearance of transaction fees after the full operation of the electronic procurement system in January 2003. As a MSC status company, CDC is exempted from corporate tax under the Pioneer Status tax incentive for a period of 10 years.
CDC’s pro-forma debt leverage is aggressive at around 6.5 times, after accounting for the bonds issue and projected fresh equity injection of RM20 million in FY2001. The debt leverage, nevertheless, is expected to be rapidly reduced to 3.50 times, 1.91 times and 1.05 times in FY2002, 2003 and 2004 respectively, reflecting the effect of retained earnings.