MARC has revised Evermaster Group Berhad’s (“EGB”) MARCWatch status on its MARC-2 ID rating in respect of its RM40 Million Murabahah Multi-Option Notes Issuance Facility (MONIF) to Negative from Developing. Concurrently, MARC has also placed the Group’s long-term rating of A- ID on MARCWatch Negative in respect of its RM50 Million Al-Bai Bithaman Ajil Islamic Debt Securities (BaIDS). The short term rating was originally placed on MARCWatch Developing in December 2006 as a result of the potential for increased refinancing risk stemming from Abrar Discount Berhad’s (Abrar) closure.

The current rating actions follow the recent release of unaudited financial year ended March 31, 2007 results. The company recorded pretax profit of RM1.78 million for the financial year ended March 31, 2007, as compared to a pretax loss of RM2.82 million for the financial year ended March 31, 2006. Operating results have been negatively affected by its escalating operating costs and its inability to secure new log concessions, whilst material advances made to log suppliers and long receivables collection period have weakened its cash flow measures. Furthermore, EGB’s financial flexibility appears limited due to its current low cash balances and its debt to equity ratio which is close to EGB’s covenanted level of 1.25 times. The recent operating results seem to suggest that EGB’s financial performance is unlikely to improve meaningfully over the near to medium term.

In addition, the underwriting arrangement with respect to EGB’s short-term underwritten facility has yet to be resolved. MARC has been in active discussion with EGB’s management and expects to finalize the rating within the near future.