MARC affirmed a rating of A (A Flat) to Haisan Resources Berhad (HRB)’s RM30 million bonds with a stable outlook; reflecting its strong competitive position in the refrigeration and ice industry, assignment of specific contract proceeds towards redemption of the bonds as well as HRB’s good operating profit margin and moderated by its high debt leverage position.

Incorporated in 1999, HRB is principally involved in the whole spectrum of the refrigeration and ice industry, which includes provision of temperature controlled logistics (TCL) services, provision of engineering services related to industrial refrigeration, ice manufacturing and warehousing. The Group obtained the listing status on the Second Board of Bursa Malaysia in January 2001

Owning approximately 507,268 square feet of TCL warehousing space, HRB’s TCL operation has been expanding over the years and is currently the major revenue contributor for the Group. HRB’s modern facilities coupled with its good services had earned itself a clientele comprising leaders and multinational corporations in their respective industries. Leveraging on their strong local foothold, HRB has successfully ventured along with its customers into China and Philippines.

HRB’s engineering division is also well-regarded as one of the leading fabricator-contractor of industrial refrigeration equipment in Malaysia with more than three decades of experience. In addition to servicing its customers, the engineering division offers the Group an added advantage in its in-house TCL division.

Under the issue structure, a Revenue Account (RA) will capture the rental proceeds of approximately RM6.5 million per annum from three specified contracts. Monies in this account are earmarked for the redemption of the bonds upon maturity. HRB’s good competitive position in the provision of multi temperature controlled facilities (MTCF) services mitigates the risk of early termination of contracts. While the bonds have a bullet repayment structure of the bonds, liquidity risk is largely mitigated through the build-up mechanism of the RA; where 20% of the total facility size shall be deposited into the RA yearly starting from the first year anniversary towards the end of the facility.

Financially, the group achieved a significant revenue growth of 47% with revenue of RM68 million in year 2005 compared to RM46 million in year 2004. The improved performance was mainly attributable to the contribution from its TCL and engineering division. The group’s improved result was also contributed from the consolidation of IGLO in the Philippines since the beginning of the year. In tandem with the rise in revenue, operating margin also posted a respectable result in year 2005 with a margin of 17% compared to 13% in year 2004.The improvement was attributable to higher sales and contribution from other operating income which increased by more than 100%.

Although profitability improved, the group debt leverage has increased significantly from 0.75x in year 2004 to 1.25x in year 2005. The increase was mainly due to expansion of the TCL faclities in Malaysia as well as in China. With the higher load of borrowings, the group’s financial results is expected to be strained with higher finance cost in the coming years.