The short and long-term ratings of Delloyd Ventures Berhad’s (“Delloyd” or the “Group”) RM100 million Islamic CP/MTN Programme at MARC-1ID/A+ID respectively reflect Delloyd’s strengthening financials against the backdrop of firm market leadership with regard to the Group’s automotive components and parts manufacturing business. Factors which may contribute towards downward rating pressure, however, include the mixed outlook of the domestic automotive industry vis-a-vis the Group’s continued dependence on Proton and potentially increased operating risk profile associated with its venture into oil palm plantation business in Indonesia.

Delloyd is a tier-1 vendor to Proton and Perodua, producing over 40 automotive products/parts such as door mirrors, door modules, alarm security system, antennas, bumpers, power window system and central locking system. It is the leading manufacturer and supplier of door mirrors in the local automotive market. Apart from supplying to major local auto players such as Proton, Perodua, Assembly Services Sdn Bhd, Oriental-Hyundai Sdn Bhd, and Naza Kia Sdn Bhd, the Group has also widened its presence in the regional market.  It has operations in Indonesia and in the midst of rolling out its manufacturing facility in Thailand.  Although percentage of overseas operations accounted for less than 10% of the Group’s total revenue in FY2005, the revenue mix is anticipated to change, going forward, following its success in securing contracts from General Motors (Thailand) and General Motors Holden (Australia).

To diversify its earnings base and mitigate its overdependence on the automotive components and parts sector, Delloyd had ventured into oil palm business in 1999 via its 90%-owned subsidiary, Delloyd Plantation Sdn Bhd (DPSB) which owns the Sungai Rambai Estate, a 1,449-hectare oil palm estate located in Kuala Selangor. DPSB is currently in the final stages of completing the acquisition of a 60% stake in PT Rebinmas Jaya (PTR) which owns, operates and manages three oil palm plantations in Pulau Belitung, Sumatera with a total hectarage of 13,950 hectares.

Delloyd’s operating profit margin averaged at 18.2% over the past five financial years, although the margins for FY2004 and FY2005 were below 15.0%; attributed to higher cost of raw materials and the inclusion of lower yielding margin from vehicle distribution division. Reflecting its low level of gearing, virtually nil in the past three financial years, the Group’s debt servicing capability is relatively strong. The proposed RM100 million CP/MTN facility would result in a pro-forma debt-equity of approximately 0.40 times. Based on its base case cashflow projections, Delloyd’s average DSCR appears robust, projected at 5.7 times with the minimum 1.7 times occurring at the maturity of the facility.

With regard to the CP/MTN facility, MARC recognizes that there is an exposure to liquidity risk as the CPs will not be underwritten. Nevertheless, this is mitigated to a certain degree via the Group’s existing cash balance coupled with its undrawn banking facilities. Over the past five financial years, Delloyd has been maintaining a minimum cash balance of not less than RM40 million. In addition, the Group’s unutilized credit lines as at end May 2006 stood at approximately RM56.7 million.

This announcement supersedes the earlier announcement dated 27 June 2006.