Friday, Apr 07, 2006
MARC has affirmed Tracoma Holdings Berhad’s (“Tracoma”) RM100 million Al- Bai’ Bithaman Ajil Islamic Debt Securities (“BaIDS”) at AID, underpinned by Tracoma Group’s proven track record as a Tier-1 local automotive component manufacturer coupled with its on-going expansion plans. Nonetheless, moderating factors to the rating include the Group’s exposure towards the automakers’ performances, particularly concentration risk on Proton and Perodua; vulnerability of the local automotive industry to economic cycles and competition arising from trade liberalisation; and the Group’s higher gearing level. MARC has attached a developing outlook on Tracoma’s rating pending resolution of its earlier joint venture with Proton in Indonesia.
Tracoma is primarily involved in the manufacturing and supply of metal-based and tubing parts components mostly for car models manufactured by Proton and Perodua (“P&P”). Two subsidiaries under Tracoma, namely Tracoma Sdn Bhd (“TSB”) and Profen Sdn Bhd (“Profen”), are among thirty of P&P’s Tier-1 suppliers. In addition, Tracoma also produces automotive parts for foreign car makers like Toyota, Honda, Nissan, Hyundai and Volvo. Drawing experience as a Tier-1 supplier and capitalising on its technical competencies as well as product quality recognition, Tracoma is positioning itself to secure more contracts from various automakers with the advent of AFTA or trade liberalisation of the Asean region involving the automotive industry.
The relocation to a bigger manufacturing facility in Tanjung Malim from Shah Alam is a strategic move to integrate the Group’s operation to further enhance factory automation and productivity as well as to expand its medium to large metal stamping capability in addition to its existing products. Besides that, Tracoma is developing expertise in other areas of specialisation to complement its core business in automotive parts and components. To diversify its income sources, Tracoma has entered into a joint venture with Proton in 2004 to undertake the manufacture and assembly of Proton models in Indonesia which has yet to fully take off.
Based on the unaudited results of FY2005, Tracoma registered a commendable revenue growth of 38.9% to RM122.1 million attributable to the higher demand for automotive parts and components by P&P vis-à-vis the total industry volume’s (“TIV”) growth of 13%. However, pre-tax profit decreased to RM4.3 million (FY2004: RM13.1 million) as a result of higher production cost and finance cost, change in accounting treatment for pre-operating expenses, as well as the losses in associate companies totalling RM1.9 million. Furthermore, post-tax profit was affected by its prior years’ tax adjustments amounting to RM1.6 million which is a one-off adjustment. In addition, the Group expects its financial performance to improve in anticipation of approved higher pricing for the automotive parts supplied to Proton for existing and the upcoming car models.
Tracoma’s debt leverage ratio increased significantly to 1.83x in FY2005 (FY2004: 0.5x) on account of the RM100 million BaIDS and RM40 million collateralised loan obligation (“CLO”) drawn down in 2005. Consequently, the Group’s operational cash flow weakened as compared to previous year due to the direct impact of higher finance cost. Notwithstanding, a maximum leverage of 2.0x has been imposed under the BaIDS issue structure and its DSCR is still within the covenanted level based on its FY2005 unaudited results.
Tracoma is primarily involved in the manufacturing and supply of metal-based and tubing parts components mostly for car models manufactured by Proton and Perodua (“P&P”). Two subsidiaries under Tracoma, namely Tracoma Sdn Bhd (“TSB”) and Profen Sdn Bhd (“Profen”), are among thirty of P&P’s Tier-1 suppliers. In addition, Tracoma also produces automotive parts for foreign car makers like Toyota, Honda, Nissan, Hyundai and Volvo. Drawing experience as a Tier-1 supplier and capitalising on its technical competencies as well as product quality recognition, Tracoma is positioning itself to secure more contracts from various automakers with the advent of AFTA or trade liberalisation of the Asean region involving the automotive industry.
The relocation to a bigger manufacturing facility in Tanjung Malim from Shah Alam is a strategic move to integrate the Group’s operation to further enhance factory automation and productivity as well as to expand its medium to large metal stamping capability in addition to its existing products. Besides that, Tracoma is developing expertise in other areas of specialisation to complement its core business in automotive parts and components. To diversify its income sources, Tracoma has entered into a joint venture with Proton in 2004 to undertake the manufacture and assembly of Proton models in Indonesia which has yet to fully take off.
Based on the unaudited results of FY2005, Tracoma registered a commendable revenue growth of 38.9% to RM122.1 million attributable to the higher demand for automotive parts and components by P&P vis-à-vis the total industry volume’s (“TIV”) growth of 13%. However, pre-tax profit decreased to RM4.3 million (FY2004: RM13.1 million) as a result of higher production cost and finance cost, change in accounting treatment for pre-operating expenses, as well as the losses in associate companies totalling RM1.9 million. Furthermore, post-tax profit was affected by its prior years’ tax adjustments amounting to RM1.6 million which is a one-off adjustment. In addition, the Group expects its financial performance to improve in anticipation of approved higher pricing for the automotive parts supplied to Proton for existing and the upcoming car models.
Tracoma’s debt leverage ratio increased significantly to 1.83x in FY2005 (FY2004: 0.5x) on account of the RM100 million BaIDS and RM40 million collateralised loan obligation (“CLO”) drawn down in 2005. Consequently, the Group’s operational cash flow weakened as compared to previous year due to the direct impact of higher finance cost. Notwithstanding, a maximum leverage of 2.0x has been imposed under the BaIDS issue structure and its DSCR is still within the covenanted level based on its FY2005 unaudited results.