Monday, Apr 24, 2006
Shamelin Bina Sdn Bhd’s (“SBSB”) rating has been reaffirmed at A-ID which reflects, Koperasi Shamelin Berhad’s (KSB) satisfactory asset quality arising from the collection arrangement with ANGKASA (Angkatan Koperasi Kebangsaan Malaysia Berhad); low level of job transfers and resignations in the public sector; positive cashflow generating capacity throughout the tenure of the Murabahah Medium-Term Notes Issuance (“MMTN”) Facility; as well as a protective debt issue structure. The moderating factor continues to be the risk profile of the consumer-related industry characterized by increasing competition and vulnerability to economic cycles.
SBSB, a wholly owned subsidiary of KSB, has been designated as the issuing vehicle whereby, proceeds from the issuance of the MMTN will be largely on-lent to KSB for the purpose of refinancing its existing borrowings and generating new consumer financing. Hence, cashflows from KSB’s operations will be the main source of redemption of the Murabahah Notes.
KSB is established under the Co-operative Societies Act 1993 and its main source of revenue is derived from consumer financing. A wide range of consumer products including furniture, electrical appliances and other household products are available for its members comprising mainly civil servants. Consumer financing provided is based on the Al-Bai Bithaman Ajil principles, whereby repayments are effected via monthly deductions of the consumers’ salaries; the collection of which is arranged through ANGKASA. KSB’s loan portfolio quality is relatively good, based upon the low level of delinquency in the public sector accounts, most of which arise mainly from job transfers and resignations.
Revenue in FY2004 more than tripled to RM6.4 million as compared to RM2.1 million in FY2003 following increased activity in consumer financing made possible through the increased availability of funds provided via the MMTN facility. Subsequently, operating margin went up to 110.1%, a marked increase from 94.0% in FY2003. To date, a total of RM50 million have been drawn down under the MMTN facility. MARC notes that KSB’s unaudited results for FY2005 reported a significant rise in revenue to RM9.9 million in comparison to the RM6.4 million recorded in FY2004, due to availability of funds for disbursement of consumer financing following from the last two MMTN drawdowns of RM10 million and RM20 million respectively.
Liquidity risk is mitigated through the serial redemption of the Murabahah Notes; the availability of funds in the Trading Profit Account to meet the payment obligations under the MMTN in the event of insufficient funds in the Collection Account; liquidity support provided by the maintenance of an amount equivalent to the next twelve months’ secondary notes at all times in the Finance Service Reserve Account; and the two-year build up of funds in the Sinking Fund Account (SFA) prior to the primary notes redemption date of each tranche. The build up of funds in the SFA will commence in March 2007, two years prior to redemption of the first tranche in March 2009. In addition, in the event of negative shareholders’ funds for SBSB, KSB has provided an undertaking to inject additional equity or extend inter-company financing to SBSB.
KSB’s debt equity level in FY2004 increased to 0.54x and further to 0.84x in FY2005. The increases are mainly attributed to the MMTN issuances which constitute the main debt obligation of KSB. Furthermore, with subsequent drawdowns of the MMTN, KSB’s pro-forma debt equity level is expected to rise further to 1.15x in FY2006, peaking at 1.40x in FY2007 and decreasing to 0.04x by the end of the facility period. Based on the stress analysis conducted, MARC found that the cashflow projections were moderate and proved to be vulnerable following a decrease in trading and financing income of up to 5%.
SBSB, a wholly owned subsidiary of KSB, has been designated as the issuing vehicle whereby, proceeds from the issuance of the MMTN will be largely on-lent to KSB for the purpose of refinancing its existing borrowings and generating new consumer financing. Hence, cashflows from KSB’s operations will be the main source of redemption of the Murabahah Notes.
KSB is established under the Co-operative Societies Act 1993 and its main source of revenue is derived from consumer financing. A wide range of consumer products including furniture, electrical appliances and other household products are available for its members comprising mainly civil servants. Consumer financing provided is based on the Al-Bai Bithaman Ajil principles, whereby repayments are effected via monthly deductions of the consumers’ salaries; the collection of which is arranged through ANGKASA. KSB’s loan portfolio quality is relatively good, based upon the low level of delinquency in the public sector accounts, most of which arise mainly from job transfers and resignations.
Revenue in FY2004 more than tripled to RM6.4 million as compared to RM2.1 million in FY2003 following increased activity in consumer financing made possible through the increased availability of funds provided via the MMTN facility. Subsequently, operating margin went up to 110.1%, a marked increase from 94.0% in FY2003. To date, a total of RM50 million have been drawn down under the MMTN facility. MARC notes that KSB’s unaudited results for FY2005 reported a significant rise in revenue to RM9.9 million in comparison to the RM6.4 million recorded in FY2004, due to availability of funds for disbursement of consumer financing following from the last two MMTN drawdowns of RM10 million and RM20 million respectively.
Liquidity risk is mitigated through the serial redemption of the Murabahah Notes; the availability of funds in the Trading Profit Account to meet the payment obligations under the MMTN in the event of insufficient funds in the Collection Account; liquidity support provided by the maintenance of an amount equivalent to the next twelve months’ secondary notes at all times in the Finance Service Reserve Account; and the two-year build up of funds in the Sinking Fund Account (SFA) prior to the primary notes redemption date of each tranche. The build up of funds in the SFA will commence in March 2007, two years prior to redemption of the first tranche in March 2009. In addition, in the event of negative shareholders’ funds for SBSB, KSB has provided an undertaking to inject additional equity or extend inter-company financing to SBSB.
KSB’s debt equity level in FY2004 increased to 0.54x and further to 0.84x in FY2005. The increases are mainly attributed to the MMTN issuances which constitute the main debt obligation of KSB. Furthermore, with subsequent drawdowns of the MMTN, KSB’s pro-forma debt equity level is expected to rise further to 1.15x in FY2006, peaking at 1.40x in FY2007 and decreasing to 0.04x by the end of the facility period. Based on the stress analysis conducted, MARC found that the cashflow projections were moderate and proved to be vulnerable following a decrease in trading and financing income of up to 5%.