Monday, Mar 06, 2006
The MARC-2ID rating on the RM70.0 Million Murabahah Commercial Papers (MCP) Programme is underpinned by MM Vitaoils Sdn Bhd’s (MMV) proven business model which is primarily supported by the research and development (R&D) activities carried out by the Malaysian Palm Oil Board (MPOB). Moderating factors to the rating include MMV’s limited track record; working capital constraints that limited the company’s ability to expand its business and lack of financial flexibility.
MMV is a manufacturer of edible palm oil products such as liquid cooking oil, margarine, shortening and vegetable ghee. More than 90.0% (in terms of value) of its products are exported to over 36 countries thus mitigating concentration risk. As MMV’s products are mainly targeted at the recession resilient food industry, demand for such products is expected to be sustainable since it is closely correlated to population growth and affluence.
MMV’s plant in Shah Alam is capable of producing up to 8,000MT or 400 FCL per month. Utilisation capacity historically has, however, been relatively low as it was restricted by the company’s limited working capital funding. The funds from the proposed MCP programme will provide the much needed working capital for the company to shore up its production capacity; which would translate to an improvement in the company’s financial performance.
MMV’s competitive strength lies in its R&D activities in collaboration with MPOB, the world-renowned R&D institution specializing in palm oil; and two other independent laboratories and consulting companies. To widen its market reach, MMV promotes its range of in-house brands via the electronic and print media, sponsorships and participation in various organisations such as MPOB.
The challenge to protect profit margins at the expense of lower production capacity led to a reduction in the company’s revenue stream. For the six months period ending June 2005, MMV recorded unaudited pre-tax profit of RM144,296 on the back of RM12.1 million in revenue. Nevertheless, sales volume is usually higher in the second half of the year given the festive season, supporting expectations of higher earnings for the full year.
Liquidity risk is mitigated through the prefunding of the Profit Service Reserve Account (PSRA) sufficient to cover up to six months of profit service. In addition, the facility would be fully underwritten. A maximum debt to equity ratio of 2.5x has also been imposed under the issue structure. Upon drawdown of Tranche 1 of RM45.0 million, proforma debt leverage position is expected to reach 1.8 times based on MMV’s unaudited June 2005 figures.
MMV is a manufacturer of edible palm oil products such as liquid cooking oil, margarine, shortening and vegetable ghee. More than 90.0% (in terms of value) of its products are exported to over 36 countries thus mitigating concentration risk. As MMV’s products are mainly targeted at the recession resilient food industry, demand for such products is expected to be sustainable since it is closely correlated to population growth and affluence.
MMV’s plant in Shah Alam is capable of producing up to 8,000MT or 400 FCL per month. Utilisation capacity historically has, however, been relatively low as it was restricted by the company’s limited working capital funding. The funds from the proposed MCP programme will provide the much needed working capital for the company to shore up its production capacity; which would translate to an improvement in the company’s financial performance.
MMV’s competitive strength lies in its R&D activities in collaboration with MPOB, the world-renowned R&D institution specializing in palm oil; and two other independent laboratories and consulting companies. To widen its market reach, MMV promotes its range of in-house brands via the electronic and print media, sponsorships and participation in various organisations such as MPOB.
The challenge to protect profit margins at the expense of lower production capacity led to a reduction in the company’s revenue stream. For the six months period ending June 2005, MMV recorded unaudited pre-tax profit of RM144,296 on the back of RM12.1 million in revenue. Nevertheless, sales volume is usually higher in the second half of the year given the festive season, supporting expectations of higher earnings for the full year.
Liquidity risk is mitigated through the prefunding of the Profit Service Reserve Account (PSRA) sufficient to cover up to six months of profit service. In addition, the facility would be fully underwritten. A maximum debt to equity ratio of 2.5x has also been imposed under the issue structure. Upon drawdown of Tranche 1 of RM45.0 million, proforma debt leverage position is expected to reach 1.8 times based on MMV’s unaudited June 2005 figures.