'S ratings of AA3/P1 was left unchanged by Rating Age-ncy Malaysia Bhd (RAM) following the company's proposed acquisitions of some companies. RAM said in a statment that the group's credit standing was still commensurate with its AA3/P1 ratings. Even so, RAM said, it had some reservations about the rapid expansion and diversification of IOI in such a short span of time.
On March 20, IOI had proposed to acquire BA Plantations Sdn Bhd, Mayvin (Sabah) Sdn Bhd, Pine Capital Sdn Bhd, Right Purpose Sdn Bhd and Mayvin Inc Sdn Bhd for RM607.7mil (collectively known as “the acquiree companies”). These companies own 21,722ha of oil palm estates and a palm oil mill in Sabah.
“Should this acquisition trail continue and weaken the group's balance sheet, it will be downward pressure on the ratings as it could diminish the group's ability to withstand severe fluctuations in crude palm oil prices,” RAM said in a statement.
In addition to the purchase consideration of RM607.7mil, RAM said IOI would be assuming the acquiree companies' combined debts of RM136.6mil as at Dec 31, 2002. “The proposed acquisitions are deemed related-party transactions by virtue of sale transactions bet-ween IOI and its directors,” it said.
Assuming a pre-tax profit of RM29.8mil annually from the acquiree companies (based on the audited accounts for financial year ended (FYE) Dec 31, 2002 and FYE June 30, 2002, the return on capital employed is about 4% compared with IOI's 13% in FY 2002. However, based on the management's projection of RM70mil net profit annually in the coming year from the 21,722ha of estates, the return on capital employed will be some 9.4%. – Bernama
RAM said the stockbroking company has “a strong franchise” and has managed to sustain profitability despite the difficult operating environment. AmSecurities is a unit of AMMB Holdings Bhd.
It said that while AmSecurities was supported by sound credit risk management, ample liquidity and strong capitalisation, the nature of its business was such that performance was significantly affected by the volatility of the stock market.
However, consumer sentiment may improve this year amid expectations of better economic prospects and this could in turn boost the stock market, RAM said.
In the short-term, AmSecurities will continue to focus on increasing its inter-broking, institutional and retail businesses, RAM said. There are expectations that a merger with the AMMB group's merchant banking arm, AmMerchant Bank Bhd, in the future would transform AmSecurities into an investment bank, the agency added. – AFX
MARC said the rating reflected PJH's solid capitalisation supported by a superior set of shareholders, exceptional financial flexibility, and its importance in the development of Putrajaya.
It also reflected the structure secured by the specific assignment of the sub-lease rental receivables in respect of the government buildings that would form the primary source of redemption of the BBA serial bonds.
MARC said the RM850mil nominal value of BBA bonds would be issued in six series, with maturities ranging between two and 12 years.
The bonds would be issued based on the purchase and sale of landed properties between the joint arrangers and PJH, to facilitate the Islamic principle of BBA, said MARC.
The main securities for the facility comprise a master assignment over the concession agreement and specific assignments of the rentals receivable by PJH under each sub-lease to be created in favour of the security trustee, in respect of Wisma Putra and Deputy Prime Minister's Residence and Ministry of Finance Complex.
The construction and completion risks are significantly mitigated as the buildings have been completed and occupied by the respective government ministries, MARC said.
MARC said that the sub-lease rental income streams afford a high degree of stability and predictability to the issue-specific cash flows.
As the bonds would be issued before the execution of the sub-lease, PJH would be required to remit funds into a designated account to redeem the BBA Bonds maturing in next six months, no later than 30 days prior to the said redemption dates. – Bernama
RAM said in a statment that the group's credit standing was still commensurate with its AA3/P1 ratings. Even so, RAM said, it had some reservations about the rapid expansion and diversification of IOI in such a short span of time.
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