The rating of Leader Universal Holdings Berhad’s (Leader) RM150.0 Million Murabahah Medium-Term Notes Issuance Programme has been reaffirmed at AID. The rating outlook has been revised to developing from stable. The affirmed rating reflects the Group’s moderate and steadily improving operating margins in the cable and wire industry which is presently challenged by rising raw material prices, severe pricing pressures and cyclical demand. These factors are mitigated by Leader’s entrenched position in highly competitive segments of the domestic cable industry. Leader has been increasing its focus on higher-margin specialty cables and plans to expand its energy operations to diversify its revenues. At present, energy operations contribute 6.5% of its revenues. The outlook revision relates to the Group’s proposed development of a 200MW coal-fired power plant in Sihanoukville, Cambodia. MARC is concerned as to the implications of corresponding project funding requirements on Leader’s free cash flow and cash flow coverages. Construction of the power plant is expected to commence in 2008 and is scheduled to be in commercial operation by 2011. Leader’s equity participation of USD50.0 million in this project will likely see cash outflows in 2009 and 2010.

The ratings benefit from Leader's continued improvement in scale, profitability and cashflow. Despite higher commodity prices, Leader has been able to preserve its margins by incorporating the higher raw material prices in its cable and wire prices. Leader is Malaysia’s largest cable and wire manufacturer. It recorded revenues of RM2.36 billion and net income of RM55.7 million for the year ended 31 December 2006. As of December 2006, the Group had a contractual order book of RM700.0 million. The Group’s power generation unit, Cambodia Utilities Pte Limited (CUPL), continues to reap consistent returns from its existing 35MW oil-fired power plant in Cambodia.
 
Leader‘s revenue of RM2.36 billion in FY2006 was up 47.6% from RM1.60 billion in FY2005. The higher revenue was achieved on the back of rising metal prices and a 5.3% increase in the sales volume of its cable and wire operations in FY2006. The Group recorded higher operating cash flow of RM72.0 million from RM54.0 million in FY2005. Its power generation operations in Cambodia provided a recurring dividend stream, which amounted to USD4.7 million in FY2006. Leader’s debt leverage ratio of 1.13 times declined to 1.02 times upon its redemption of all its Euroconvertible Bonds (ECB) in May 2007. The Group’s cash and bank balances of RM144 million as at end FYE2006, coupled with unutilized credit facilities of RM92 million as at 30 June 2007, accords the Group strong financial flexibility.