Monday, Feb 27, 2006
MARC has reaffirmed the rating of Road Builder (M) Sdn Bhd’s (RBM) RM400 million Repackaged Income Securities at A+(s). The rating reaffirmation is due to the high cash coverage afforded to the outstanding bonds brought about by the accumulation of funds in the sinking fund account and a tight issue structure. RBM’s financial standing is affected by the backdrop of a challenging operating environment in the construction industry. Nevertheless, the rating reflects the shareholder support of up to RM200 million on a reducing balance provided by the holding company, Road Builder (M) Holdings Bhd (RBH).
Spearheading the construction operation of RBH, RBM’s credit strength is drawn from its established position within the local construction industry with experience in a wide range of civil engineering and building projects. Its competitive position is supported by its ability to undertake various construction projects, favourable track record of quality work, timely completion of projects and good financial resources.
Under the issue structure, a sinking fund account was established for the redemption of the bonds and assigned to the Trustee for the benefit of the bondholders. During the five-year tenure, RBM is expected to make eight scheduled payments into the sinking fund with the last payment due in June 2006, five months prior to the full redemption of the bonds. As at December 2005, the balance in the sinking fund account was RM310 million, comprising RM150 million in cash and RM160 million in bank guarantees. This translates into a coverage of 0.78x of the outstanding bonds, a comfortable level for the current rating level.
As of September 2005 RBM has an outstanding order book of RM775 million. Going forward, RBM is expected to reap benefits from the property projects undertaken by RBH while continuing to pursue opportunities on both the domestic and international front.
On the international front, RBM has gained a footing in India and has secured and completed a number of highway contracts involving the widening and strengthening of roads. Whilst there have been delays in the overall progress of projects in India arising from delays in site possessions and design approvals, RBM is endeavouring to adhere to the revised schedule of completion.
RBM’s financial performance in FY2005 has deteriorated; showing lower revenue and losses before tax which were attributable to lower margins from construction projects nearing completion and a difficult operating environment in India. In tandem with that, RBM’s operating profit margin fell to 3.9% in FY2005 compared to the better margins achieved in previous years.
RBM’s debt leverage increased to 1.50 times in FY2005 from 1.29 times in the previous year due to lower retained earnings after payment of dividend. The company’s debt service ability is still commendable with a DSCR of above 2.0 times for the third consecutive year.
Spearheading the construction operation of RBH, RBM’s credit strength is drawn from its established position within the local construction industry with experience in a wide range of civil engineering and building projects. Its competitive position is supported by its ability to undertake various construction projects, favourable track record of quality work, timely completion of projects and good financial resources.
Under the issue structure, a sinking fund account was established for the redemption of the bonds and assigned to the Trustee for the benefit of the bondholders. During the five-year tenure, RBM is expected to make eight scheduled payments into the sinking fund with the last payment due in June 2006, five months prior to the full redemption of the bonds. As at December 2005, the balance in the sinking fund account was RM310 million, comprising RM150 million in cash and RM160 million in bank guarantees. This translates into a coverage of 0.78x of the outstanding bonds, a comfortable level for the current rating level.
As of September 2005 RBM has an outstanding order book of RM775 million. Going forward, RBM is expected to reap benefits from the property projects undertaken by RBH while continuing to pursue opportunities on both the domestic and international front.
On the international front, RBM has gained a footing in India and has secured and completed a number of highway contracts involving the widening and strengthening of roads. Whilst there have been delays in the overall progress of projects in India arising from delays in site possessions and design approvals, RBM is endeavouring to adhere to the revised schedule of completion.
RBM’s financial performance in FY2005 has deteriorated; showing lower revenue and losses before tax which were attributable to lower margins from construction projects nearing completion and a difficult operating environment in India. In tandem with that, RBM’s operating profit margin fell to 3.9% in FY2005 compared to the better margins achieved in previous years.
RBM’s debt leverage increased to 1.50 times in FY2005 from 1.29 times in the previous year due to lower retained earnings after payment of dividend. The company’s debt service ability is still commendable with a DSCR of above 2.0 times for the third consecutive year.