MARC has placed Malaysian AE Models Holdings Berhad’s (“MAE”) RM200 Million Islamic Commercial Paper/Islamic Medium-Term Notes Programme (“ICP/IMTN”) on MARCWatch Developing following confirmation from its Facility Agent, Bank Muamalat Malaysia Berhad of the withdrawal of Abrar Discounts Berhad (“Abrar”) as  an underwriter for RM25 million of the ICPs (Abrar’s underwriting portion) . The action has effectively reduced the total underwritten amount from RM175 million to RM150 million. This poses a risk that MAE may be unable to find takers for this portion of its ICPs’ which together with its current tight cash flow position due to an expanding order book could further strain its working capital.

Arising from the above, MAE is challenged to obtain financing to alleviate its tight cash flow position. In the long run, at MAE’s current growth rate, proper cash flow management will stabilise its position as a competitive second-tier one-stop automated materials handling and factory automation system solutions provider. Noteworthy, MAE has recently secured additional borrowings amounting to RM20 million, which will support its working capital requirements.
 
In January 2007, MARC affirmed MAE’s ICP/IMTN short and long term ratings at MARC-2ID/AID respectively on the back of an improved financial profile supported by an expanding order book and greater geographical reach. MARC nevertheless highlighted MAE’s negative cash flow from operations as a major concern.

MARC will continue to monitor MAE’s cash flow position and the effect on its financial profile and disseminate any further rating implications, if any, accordingly.