The rating was premised on the unconditional and irrevocable undertaking by the government to guarantee the repayment of all amounts due under the KLIA Bhd notes, it said. The proceeds from the issue will be used to refinance KLIA Bhd's 3 existing loan facilities, amounting to RM4.06bil, from the Employees Provident Fund Board.
KLIA Bhd, owned by the government via the Minister of Finance (Inc), was set up to construct and develop the KL International Airport (KLIA). With the completion of the airport, KLIA Bhd continues to operate as a conduit, responsible for funding the development expenses of the airport.
It said BAT Malaysia's financial profile remained robust with healthy cash generation and a strong debt-servicing ability, despite its generous dividends.
Nevertheless, the group still faced industry-specific risks such as the threat of illegal cigarettes as well as possible tobacco tax hikes, it said.
“Barring substantial tax increase in the future, we expect the local tobacco industry to grow at low single-digit rates, in line with the nation's population expansion.”
The rating reflected the high level of stability and demand for Iris' core product - its proprietary smart card-based security solutions - from the Malaysian government, RAM said in a statement.
Its 2 biggest products are microchips used in the Malaysian Electronic Passport (MEP) and the Malaysian government multipurpose smart card (MyKad).
The rating is also supported by Iris' status as the sole smart card manufacturer in Malaysia.
Entry barriers are expected to be sufficiently high during the tenure of the proposed bonds.
The group's balance sheet is also relatively healthy; it was listed on the Mesdaq market in July 2002.
The positive factors are, however, moderated by the absence of an established track record beyond Malaysia.
Nevertheless, the group is priming itself for a more international outlook having just recently secured a 2-year deal to supply electronic passport technology and know-how to the Nigerian government for RM246mil.
Due consideration has also been given to the management's future expansion plans, which will most likely involve the acquisition of companies with complementary products and services.
“However, we do not anticipate Iris to fund any such acquisitions via debt. In this regard, we do not foresee it having to incur further indebtedness, other than in the ordinary course of business, beyond that for the proposed bonds,” the statement said. – Agencies
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