RAM Ratings reaffirms Road Builder's A1/P1 ratings

Published on 22 December 2011
RAM Ratings has reaffirmed the A1/P1 ratings of Road Builder (M) Sdn Bhd’s (“RBM” or “the Company”) RM400 million Commercial Papers/Medium-Term Notes Programme (2006/2013) (“CP/MTN”), with a stable outlook. RBM is principally engaged in construction and is wholly owned by IJM Corporation Berhad (“IJM” or “the Group”), a diversified conglomerate with interests in construction, property development, manufacturing and quarrying, plantation, tolling and port operations.

The ratings of RBM’s CP/MTN reflect the high likelihood of support from its parent, IJM, given the close connection between the 2 entities. The Company is expected to be able to count on ready support (business and financial) from IJM, if needed. The Group’s strong credit profile is underscored by its diversified earnings base as well as its established position in the construction and property sectors, in addition to its healthy financial profile.

On a stand-alone basis, RBM has established a sound track record in the local construction industry via its involvement in various civil-engineering and building projects, including tolled roads, dams, water-treatment plants, airports and properties. At present, the Company’s healthy RM600 million order book is underpinned by the ongoing apportionment of construction projects from IJM, given that the former’s operations and human resources have been fully integrated with the IJM Group’s construction division since 2007.

As at end-March 2011, RBM’s gearing level and funds from operations debt coverage ratio stood at a comfortable 0.42 times and 0.24 times, respectively. The Company has sufficient liquidity to cover its short-term debt obligations. Its cash balances of RM115.60 million as at end-September 2011 amply cover the last principal repayment of RM40 million on its CP/MTN in March 2012.

On the other hand, RBM is exposed to the cyclical and competitive construction industry, similar to all construction companies. Nonetheless, we maintain a positive outlook on the construction sector, underscored by the implementation of projects under Budget 2012, the 10th Malaysia Plan and the Economic Transformation Programme. This, in addition to IJM’s strong branding and track record, augurs well for the Group (and, in turn, RBM) in terms of order-book replenishment. We note that the Group has submitted bids for myriad contracts and had pre-qualified for various large-scale projects.

Media contact
Lawrence Leong
(603) 7628 1187
lawrence@ram.com.my