Wednesday, Aug 24, 2005
The affirmation of EP Manufacturing Bhd’s (EPMB) short-term/long-term ratings of MARC-2ID/AID on its RM150 million Islamic MUNIF/IMTN mainly reflects the Group’s position as a Tier-1 parts vendor for the national carmaker, Proton, via its subsidiary; Peps-JV. Moderating factors, however, include its heavy dependence on the sales performance of national cars (i.e. Proton and Perodua) and the inherent risks of the automotive industry.
EPMB manufactures and supplies automotive products to both the original and replacement markets. Its original market comprise mainly national car makers, i.e. Proton and Perodua manufacturing plants, while its replacement market covers both Proton and Perodua’s service and parts centres. As part of its on-going business re-engineering initiatives, EPMB is evolving to be a supplier of components in a modular form with system integration. EPMB currently operates from two manufacturing plants in Shah Alam (EP Polymers) and Ulu Yam (Peps-JV). Going forward, EPMB’s prospects will be driven by its 79.5%-owned subsidiary Peps-JV which is a tier-one supplier to Proton and Perodua. Other growth drivers include its 100%-owned subsidiary (Fundwin) which supplies braking system to Proton under a BOSCH Contract and also exports components for a face-lift version of the Toyota Land Cruiser for the Middle East markets.
Revenue continued its uptrend since FY2001, to reach RM239.1 million in FY2004. However, this was significantly below EPMB’s earlier projection of RM305.9 million. The shortfall was due to the delay in the launching and production of Gen 2 resulting in the Group’s composite division generating RM5.5 million in revenue against RM69.5 million projected previously. Nevertheless, revenue from the Group’s automotive segment grew by 13.4% to RM233.6 million. Similar to most component manufacturers, EPMB is exposed to foreign currency fluctuations arising from parts and raw material purchases which are mostly denominated in Yen. Rising translation costs which are not easily transferred to the consumers, are an industry wide phenomena and not unique to EPMB alone.
As anticipated, the Islamic MUNIF/IMTN issue resulted in EPMB’s debt leverage increasing to 0.83 times in FY2004. The impact of the higher borrowings was somewhat mitigated by the accumulated retained earnings. Under the terms and conditions of the Islamic MUNIF/IMTN issue, EPMB’s debt-leverage is capped at 1.5x.
EPMB manufactures and supplies automotive products to both the original and replacement markets. Its original market comprise mainly national car makers, i.e. Proton and Perodua manufacturing plants, while its replacement market covers both Proton and Perodua’s service and parts centres. As part of its on-going business re-engineering initiatives, EPMB is evolving to be a supplier of components in a modular form with system integration. EPMB currently operates from two manufacturing plants in Shah Alam (EP Polymers) and Ulu Yam (Peps-JV). Going forward, EPMB’s prospects will be driven by its 79.5%-owned subsidiary Peps-JV which is a tier-one supplier to Proton and Perodua. Other growth drivers include its 100%-owned subsidiary (Fundwin) which supplies braking system to Proton under a BOSCH Contract and also exports components for a face-lift version of the Toyota Land Cruiser for the Middle East markets.
Revenue continued its uptrend since FY2001, to reach RM239.1 million in FY2004. However, this was significantly below EPMB’s earlier projection of RM305.9 million. The shortfall was due to the delay in the launching and production of Gen 2 resulting in the Group’s composite division generating RM5.5 million in revenue against RM69.5 million projected previously. Nevertheless, revenue from the Group’s automotive segment grew by 13.4% to RM233.6 million. Similar to most component manufacturers, EPMB is exposed to foreign currency fluctuations arising from parts and raw material purchases which are mostly denominated in Yen. Rising translation costs which are not easily transferred to the consumers, are an industry wide phenomena and not unique to EPMB alone.
As anticipated, the Islamic MUNIF/IMTN issue resulted in EPMB’s debt leverage increasing to 0.83 times in FY2004. The impact of the higher borrowings was somewhat mitigated by the accumulated retained earnings. Under the terms and conditions of the Islamic MUNIF/IMTN issue, EPMB’s debt-leverage is capped at 1.5x.