Thursday, Feb 16, 2006
MARC has affirmed the short and long-term ratings of MARC-2ID and A-ID (A minus, Islamic Debt) in respect of Paradym Resources Industries Sdn Bhd’s (PRI) Islamic Commercial Paper/Medium Term Notes Issuance Programme (Islamic CP/MTN). The affirmation of the ratings reflects PRI’s commendable improvement in its financial position and PRI’s status as a reputable manufacturer of superior quality copper products. PRI’s ratings continue to be supported by the contracts awarded by The Royal Mint of Malaysia Sdn Bhd (RMM) and Bank Negara Malaysia (BNM) to PRI. Moderating PRI’s credit strength is its relatively low capital position and vulnerability to product substitution.
PRI is primarily engaged in the manufacturing and selling of copper rods, copper wires and copper strips particularly for the power and telecommunication industries. PRI had entered into an agreement with RMM to supply and deliver Cupro-Nickel 25 (CuNi) strips to RMM on behalf of BNM. Simultaneously, PRI had also entered into an agreement with BNM to purchase the raw materials for the project. Under the agreement, RMM is obliged to take-up the whole contracted amount, thus mitigating demand risk for the project. Since December 2004, PRI has started to procure raw materials and commenced the production of CuNi. The project’s credit risk is well mitigated given that the CuNi project’s payments will be made by BNM and RMM. The stable and predictable cash flow can substantially meet PRI’s obligations toward the Islamic CP/MTN.
Over the past two financial years, PRI managed to record major improvement in its profitability after securing more contracts. While PRI’s operating margin dropped to a single digit, due to higher operating costs, its earnings from operations are still able to cover its debt obligations as depicted by the adequate interest coverage ratio. In line with projections, PRI’s debt to equity ratio touched 4.0 times as at FY2004 after the issuance of the Islamic CP/MTN. Nevertheless, as of September 2005, PRI has pared down its borrowings to reach a debt to equity ratio of 3.7 times, well below the covenanted 4.25 times.
PRI is primarily engaged in the manufacturing and selling of copper rods, copper wires and copper strips particularly for the power and telecommunication industries. PRI had entered into an agreement with RMM to supply and deliver Cupro-Nickel 25 (CuNi) strips to RMM on behalf of BNM. Simultaneously, PRI had also entered into an agreement with BNM to purchase the raw materials for the project. Under the agreement, RMM is obliged to take-up the whole contracted amount, thus mitigating demand risk for the project. Since December 2004, PRI has started to procure raw materials and commenced the production of CuNi. The project’s credit risk is well mitigated given that the CuNi project’s payments will be made by BNM and RMM. The stable and predictable cash flow can substantially meet PRI’s obligations toward the Islamic CP/MTN.
Over the past two financial years, PRI managed to record major improvement in its profitability after securing more contracts. While PRI’s operating margin dropped to a single digit, due to higher operating costs, its earnings from operations are still able to cover its debt obligations as depicted by the adequate interest coverage ratio. In line with projections, PRI’s debt to equity ratio touched 4.0 times as at FY2004 after the issuance of the Islamic CP/MTN. Nevertheless, as of September 2005, PRI has pared down its borrowings to reach a debt to equity ratio of 3.7 times, well below the covenanted 4.25 times.