RATING Agency Malaysia Bhd (RAM) has placed a “rating watch” with a negative outlook on the A3 long-term rating for YE CHIU METAL SMELTING BHD's RM60mil redeemable unsecured bonds.
Ye Chiu and its subsidiaries are involved in the manufacturing and trading of aluminium alloys made from recycled aluminium scrap through smelting.
In a statement, RAM said the “rating watch” is a consequence of the sharp rise in Ye Chiu's debts from RM99.09mil at end-December 2002 to RM156.52mil as at end-June 2003, after its increased draw-down of trade facilities and short-term loans.
The higher borrowings stem from its 117% sales growth to RM264.4mil in the first half of 2003, compared with RM121.9mil in the year-earlier period.
“Due to the nature of its business, Ye Chiu has to purchase and pay for its raw materials in cash,” it said.
Ye Chiu's inventory and trade receivables almost doubled during this period, to RM76.84mil and RM79.76mil, respectively, as at end-June 2003, a reflection of its heavy working capital requirements, the rating agency said.
Also, as Ye Chiu intends to continue with its aggressive expansion plans in China, we do not foresee any repatriation of funds in the near future, RAM said. – AFX
·RAM has reaffirmed the long- and short-term ratings of LBS BINA GROUP BHD's RM50mil commercial paper/medium-term notes and RM50mil debt issues at A2(s) and P1(s) respectively.
“The reaffirmation is premised on LBS' sustainable performance despite stiff competition and the tougher operating environment,” RAM said in a statement.
The rating agency noted that in the past year, LBS achieved at least 60% of its sales within nine months.
The good location of its projects, coupled with competitive pricing and marketing strategies, have raised the company's profile as a developer of affordable housing.
“Being a developer of affordable housing, LBS is well positioned to reap immediate benefits from the incentives vis-a-vis the government's latest stimulus package announced on May 21,” RAM said.
It added that the company's new Bandar Saujana Putra flagship project is expected to be a prominent income contributor, with the main selling point being its proximity to Putrajaya and Sime UEP Bhd's Putra Heights.
RAM said it is less upbeat about the company's developments in Batu Pahat and Cameron Highlands due to the less favourable locations and sees the former as mitigating LBS' desired results.
However, RAM expects operational cash flow from the company's numerous projects to adequately support its debt obligations. – AFX
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