The ratings of Nam Fatt Corporation Bhd’s (Nam Fatt) RM250 million Islamic Commercial Paper/Islamic Medium-Term Notes Programme have been affirmed at MARC-1ID/A+ID with a stable outlook, premised on the tight issue structure governing this facility, with strict guidelines for drawdown and restrictions on the type of contracts, which includes among others clearance from MARC that such contracts will not have a negative impact on the rating. Additionally, proceeds from approved contracts will be ringfenced with note holders having priority of payment. Moderating factors however stem from sovereign risks associated with some of its overseas contracts and the accompanying performance risks arising therefrom. 

Nam Fatt, which is listed on the Main Board of Bursa Malaysia, currently has four main business lines, which are construction & engineering, property development, leisure and manufacturing.  Its focus is on two areas, namely construction & engineering and property development.  As at 29 August 2006, the Group’s outstanding order book stood at approximately RM639.2 million of which 39% comprised domestic projects and the remainder, foreign projects. Nam Fatt has to date completed various projects for the Government, PETRONAS-related companies, and Putrajaya Holdings Sdn Bhd (Putrajaya). The Group has established a niche within the oil and gas industry having successfully completed several petrochemical and oil facilities projects such as the KR2 aromatics plant in Kertih in 1999 and The Malaysia Olefins Plant in 2001. Amongst its notable on-going projects is one awarded by the National Housing Authority in Thailand for the construction of low cost apartments in Bangkok valued at RM273.0 million and one for the construction of Government quarters for Putrajaya Holdings Berhad valued at RM88.1 million.

For FYE2005, the Group’s profits decreased despite recording higher revenue and this was attributable to the non recognition of profits from its ongoing Melut Basin project in Sudan which is facing additional costs incurred for variation orders and is pending variation order claims. MARC is of the view that resolution of these claims will be protracted. Noteworthy, the Melut Basin project is financed independently and is not under this programme. The Group’s financial position, affected by the cost overruns on the Melut Basin project will be dependant on its existing order book to alleviate the situation. Evident of its affected financial position, the Group’s operating margins have decreased to 4.4% in FYE2005 (FYE2004: 7.2%).  For FYE2005, the Group’s net cash flow from operations decreased to RM17.6 million (FYE2004: RM51.7 million) mainly due to an increase in trade receivables from the Melut Basin project and the Gerbang Perdana CIQ project. On a positive note, Nam Fatt’s leverage levels continue to remain low.