Tuesday, Nov 13, 2001
Road Builder (M) Sdn Bhd’s (RBM) rating of A+(s) (single A plus, support) in respect of its RM400 million Repackaged RBM Income Securities reflects RBM’s competitive position in the civil engineering and building segment; good track record; experienced management team and a tight issue structure. The rating also reflects the shareholder’s support of a maximum RM200 million on a reducing balance afforded by the holding company, Road Builder (M) Holdings Bhd (RBH). Limiting credit considerations include the inherent cyclicality of the construction industry and RBM’s increased debt leverage upon issuance of the bonds.
RBM, a wholly-owned subsidiary of listed RBH, is one of the established construction companies in the country with a wide range of construction projects in its portfolio. The company’s competitive position is backed by its ability to undertake various construction projects, favourable track record of quality work and timely completion of projects and good financial resources. RBM’s growing participation in construction projects outside Malaysia has helped to supplement its earnings base, given the present difficult conditions in the domestic market. With an order book in excess of RM2 billion, this should adequately sustain the company’s revenue base for the next three years.
RBM’s list of completed projects in the domestic market include The National Sports Complex Phase 1A and Aquatic Centre in Bukit Jalil, Berungis - Kota Belud road project in Sabah, Sungai Besi toll road project and KLIA Package CA01-Administration Building. On the international front, RBM’s participation in projects has been on joint venture basis. Amongst the projects completed are the Sheraton Hanoi Hotel in Vietnam and the Noi Bai Export Processing Zone Stage 1 - Phase 1. The company has also secured a number of highway contracts in India, involving the widening and strengthening of roads.
The growth of the domestic construction industry is expected to remain sluggish through the medium term set against the backdrop of the weakening economy. Activities in the construction sector 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 for the limited number of projects available and margins will be squeezed in the process.
Coupon payments under the bonds are supported by a liquidity buffer maintained in a separate Debt Service Reserve Account equivalent to one full bond coupon payment. In respect of the principal repayment, RBM is required to build up funds in a Sinking Fund Account at six-monthly intervals, beginning the 13th month from the date of issuance. In the event of a shortfall in the account, the holding company, RBH, is required to cover such shortfall, subject to a limit of RM200 million which shall be stepped down over the tenure of the facility corresponding to the build up of funds in the account. Bondholders’ have priority interest over the company’s funds by operation of the payment waterfall established under the issue structure.
RBM’s revenue has been declining over the past two fiscal years with the completion of several of its projects coupled with the effects of the slowdown in the economy. In the intermediate term, the company’s revenue base is expected to be sustained by its existing projects and new contracts secured in the current year.
Upon the issuance of the bonds, RBM’s pro-forma debt leverage will escalate to 2.20 times from 0.5 times in FY2000. The gradual build up of funds in the Sinking Fund will effectively reduce bondholders’ risk over the tenure of the facility.
Generally, RBM possesses the cash generation capacity to meet its debt servicing requirement. Support for the company’s cash flow is provided by the holding company, RBH.
RBM, a wholly-owned subsidiary of listed RBH, is one of the established construction companies in the country with a wide range of construction projects in its portfolio. The company’s competitive position is backed by its ability to undertake various construction projects, favourable track record of quality work and timely completion of projects and good financial resources. RBM’s growing participation in construction projects outside Malaysia has helped to supplement its earnings base, given the present difficult conditions in the domestic market. With an order book in excess of RM2 billion, this should adequately sustain the company’s revenue base for the next three years.
RBM’s list of completed projects in the domestic market include The National Sports Complex Phase 1A and Aquatic Centre in Bukit Jalil, Berungis - Kota Belud road project in Sabah, Sungai Besi toll road project and KLIA Package CA01-Administration Building. On the international front, RBM’s participation in projects has been on joint venture basis. Amongst the projects completed are the Sheraton Hanoi Hotel in Vietnam and the Noi Bai Export Processing Zone Stage 1 - Phase 1. The company has also secured a number of highway contracts in India, involving the widening and strengthening of roads.
The growth of the domestic construction industry is expected to remain sluggish through the medium term set against the backdrop of the weakening economy. Activities in the construction sector 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 for the limited number of projects available and margins will be squeezed in the process.
Coupon payments under the bonds are supported by a liquidity buffer maintained in a separate Debt Service Reserve Account equivalent to one full bond coupon payment. In respect of the principal repayment, RBM is required to build up funds in a Sinking Fund Account at six-monthly intervals, beginning the 13th month from the date of issuance. In the event of a shortfall in the account, the holding company, RBH, is required to cover such shortfall, subject to a limit of RM200 million which shall be stepped down over the tenure of the facility corresponding to the build up of funds in the account. Bondholders’ have priority interest over the company’s funds by operation of the payment waterfall established under the issue structure.
RBM’s revenue has been declining over the past two fiscal years with the completion of several of its projects coupled with the effects of the slowdown in the economy. In the intermediate term, the company’s revenue base is expected to be sustained by its existing projects and new contracts secured in the current year.
Upon the issuance of the bonds, RBM’s pro-forma debt leverage will escalate to 2.20 times from 0.5 times in FY2000. The gradual build up of funds in the Sinking Fund will effectively reduce bondholders’ risk over the tenure of the facility.
Generally, RBM possesses the cash generation capacity to meet its debt servicing requirement. Support for the company’s cash flow is provided by the holding company, RBH.