Wednesday, November 30, 2011

RAM Ratings reaffirms AAA/P1 ratings of Malaysia Airports' RM3.10 billion sukuk

Published on 25 November 2011

RAM Ratings has reaffirmed the respective long- and short-term ratings of AAA and P1 for Malaysia Airports Capital Berhad’s (“MACB”) RM3.10 billion Islamic Medium-Term Notes Programme (2010/2025) and RM1.00 billion Islamic Commercial Paper Programme (2010/2017); both facilities have a combined limit of RM3.10 billion in nominal value and are collectively referred to as “the Sukuk”. The long-term rating has a stable outlook.

MACB is a special-purpose vehicle set up as a wholly owned subsidiary of Malaysia Airports Holdings Berhad (“MAHB” or “the Group”), to undertake the issuance of the Sukuk for the latter. The transaction ensures the Sukuk holders’ recourse to MAHB, via Ijarah payments and a Purchase Undertaking from MAHB for the Ijarah structure, and an Undertaking to Purchase by MAHB under the Commodity Murabahah structure. Given this, the ratings reflect MAHB’s credit risk.

MAHB is the exclusive 25-year concession holder that operates, manages and maintains Kuala Lumpur International Airport (“KLIA”). The Group also holds a separate 25-year concession to operate, manage and maintain all other Malaysian airports as well as short-take-off and landing ports (collectively referred to as “the Designated Airports”), with the exception of Senai International Airport in Johor .

The ratings reflect MAHB’s solid business profile, which is anchored by its position as the sole operator of all the 39 government-owned airports in Malaysia. This is underscored by the Group’s strong adjusted margin on operating profit before depreciation, interest and tax of around 35% for the past 4 years. Passenger traffic at MAHB’s airports continued trending upwards in 2010; it recorded a 12.7% increase that nearly doubled the average growth for 2006–2009. The rise was spurred by the strong growth in the low-cost-carrier segment. Elsewhere, MAHB enjoys a strong collaborative relationship with the Government given the Group’s critical role as the operator of almost all Malaysian airports.

Following the issuance of RM2.5 billion of IMTN, MAHB’s adjusted gearing ratio and adjusted funds from operations (“FFO”) debt coverage stood at 0.85 times and 0.21 times, respectively, as at end-December 2010; these were within expectations. Looking ahead, we note that MAHB’s capital expenditure (“capex”) has been revised upwards for the next 3 years. “The sum covers the construction of the new low-cost-carrier-terminal, the upgrading of Penang International Airport and the ongoing upkeep of its Designated Airports,” notes Kevin Lim, RAM Ratings’ Head of Consumer and Industrial Ratings.

Meanwhile, the Group’s management has expressed the intention of maintaining a gearing ratio of below 1 time. “As such, we expect MAHB to use a combination of debt and equity to fund its capex. In line with this, we anticipate MAHB’s adjusted FFO debt coverage to stay adequate at above 0.2 times, before improving to 0.5 times over the medium term,” adds Kevin Lim.

The ratings have factored in several challenges faced by MAHB. The Group’s operations are susceptible to event risk given that air traffic is vulnerable to external events. MAHB must also compete against other international airports within the Asia-Pacific region. Moreover, the Group’s performance is subject to regulatory risk. MAHB recently faced a temporary delay in the upward revision of its international passenger service charge as well as aircraft landing and parking charges, following outcry and lobbying from some quarters, including MAHB’s major customer, AirAsia. The Ministry of Transport subsequently allowed MAHB to proceed with the increased charges. Likewise, the Group’s ventures in India, Turkey, Maldives and China could face political and regulatory risks.

Media contact
Low Li May
(603) 7628 1175

Tuesday, November 29, 2011

Do you know that the local bond market out performed other indices in terms of risk return efficiency?

The Thomson Reuters – BPA Malaysia Conventional Bond Index and the Thomson Reuters – BPA Malaysia Islamic Sukuk Index when compared to the FTSE Bursa Malaysia KLCI Index and the Standard and Poor’s 500 Equity Index performed better on a year-on-year basis as at 30 June 2011 if risk is taken into consideration.

Learning points
Analysis using Year-on-Year Return vis-à-vis Risk Return can give conflicting results.

Check out

RAM Ratings puts negative Rating Watch on MRCB Southern Link's Senior and Junior Sukuk

Published on 22 November 2011
RAM Ratings has reviewed and placed the respective AA3 and A2 ratings of MRCB Southern Link Berhad’s (“MRCB Southern Link” or “the Company”) RM845 million Secured Senior Sukuk (2008/2025) (“Senior Sukuk”) and RM199 million Junior Sukuk (2008/2027) (“Junior Sukuk”) on Rating Watch, with a negative outlook. The Company is a wholly owned subsidiary of MRCB Lingkaran Selatan Sdn Bhd – the concessionaire for the 8.1-km Eastern Dispersal Link Expressway (“EDL”) in Johor Bahru (“JB”), which is currently more than 90%-completed. The EDL imposes toll charges on vehicles that cross the Johor-Singapore Causeway (“the Causeway”) in both directions.

The negative Rating Watch reflects the potentially lower-than-expected traffic volume for the Causeway when the EDL commences tolling operations. Based on a recent desktop traffic review by a new traffic consultant, the opening average daily traffic (“ADT”) is projected to come up to around 55,000 vehicles when the EDL begins collecting toll in 2012. This takes into account the Causeway’s latest traffic performance and possible knee-jerk reaction to the steep spike in toll rates. Given this latest development, RAM Ratings is concerned that the initially anticipated opening ADT of 62,000 vehicles - premised on the traffic study conducted in 2007 - may be a challenging task.

Assuming an ADT of at least 55,000 vehicles in 2012 (with toll collections starting in July 2012), MRCB Southern Link is expected to have a tight liquidity position in the near to medium term. Based on these assumptions, the Senior Sukuk’s debt coverage would be weaker than originally expected, albeit still adequate. On the other hand, the Company’s ability to meet the obligations on the Junior Sukuk poses a concern.

On this note, the management aims to kick off tolling operations on 1 February 2012 (estimated to provide an additional RM50 million of cashflow for debt service), besides retaining an unutilised RM37 million from the financing programme to preserve the Company’s debt coverage at the initially expected levels. If any of these do not materialise, the ratings of the Senior and Junior Sukuk will be subject to downward pressure. RAM Ratings will maintain close monitoring on the relevant developments. We note that further rating action will likely take place in the next 6 months.

Elsewhere, MRCB Southern Link’s financial commitments on the Senior and Junior Sukuk will be supported by back-to-back payments from the concessionaire once tolling operations commence; the security package ensures the Senior and Junior Sukuk holders’ full and direct recourse to the concessionaire. In this regard, we acknowledge the strong credit link between MRCB Southern Link and the concessionaire; as such, both entities are viewed in aggregate from a credit standpoint.

RAM Ratings' Rating Watch highlights a possible change in an issuer's sukuk rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated sukuk under special surveillance by RAM Ratings. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest.

Issues will appear on RAM Ratings' Rating Watch when some of the above events are expected to or have occurred. Appearance on RAM Ratings' Rating Watch, however, does not inevitably mean that the rating will be changed. It only means that a rating is under evaluation by RAM Ratings and a final affirmation is expected to be announced. A "positive" outlook indicates that a rating may be raised while a "negative" outlook indicates that a rating may be lowered. A “developing” outlook refers to those unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.

Media contact
Michael Ti
(603) 7628 1015

Thursday, November 24, 2011


Nov 21, 2011 -
MARC has affirmed its rating of A- on Perdana Petroleum Berhad's (Perdana Petroleum, formerly known as Petra Perdana Berhad) Dual Currency Revolving Programme with a negative outlook. The rating action affects outstanding secured serial bonds of RM105 million issued under Tranche 1 of the programme.
The bonds are the company's remaining obligations under the programme with the November 2011 repayment of RM10 million Medium-Term Notes (MTN) issued under Tranche 2 of the programme and the subsequent cancellation of the MTN facility.
The affirmed rating considers the uptick in revenue generation in the first six months of 2011 and signs of a turnaround in Perdana Petroleum’s financial performance after four consecutive quarters of losses. At the same time, MARC believes that the company’s significant upcoming bond maturities in 2012 will continue to pressure its discretionary cash flow.

Perdana Petroleum’s leading market position within the mid-size anchor handling tug and supply (AHTS) vessel category, the continued paring down of its debt to a more manageable level and its fund raising plans partially offset its near-term operating challenges and the refinancing risk associated with its 2012 bond maturities.

Perdana Petroleum is an offshore marine vessel supplier supporting primarily the upstream oil and gas industry. The company’s fleet renewal program which was initiated in 2007 will be completed by the end of this year upon the final delivery of a work barge. Its fleet gained seven new vessels last year. Of its new-build vessel fleet, seven are on time charter for more than 12 months, four vessels on time charter for tenures of six to eight months and three vessels are on spot charter. Excluding eight vessels which are laid-up, the fleet’s utilisation rate climbed to 85% as at end-September 2011 compared to an average of 65% in FY2010.
MARC opines that the company should benefit from the pick-up in drilling and installation activities in oil and gas industry, especially medium water-depth exploration and production activity. The company is Malaysia’s largest owner of mid-sized 10,000 brake horsepower (bhp) class AHTS vessels. MARC notes that nearly half of the vessels are on charter for less than 12 months.

The group’s results for the six months to June 30, 2011 (1HFY2011) indicate improved operating prospects. Perdana Petroleum’s revenue rose by 30% to RM140.3 million (1HFY2010: RM108.3 million), allowing the group to post a modest profit of RM0.8 million. The group had incurred a pre-tax loss of RM72.9 million in FY2010 as a result high mobilisation cost from the delivery of seven new-builds during the year, and impairment charges on property, plant and equipment and refundable deposits following adoption of new accounting standards for vessel financing.
The group's 1HFY2011 operating margin of 4.44% appears low compared to historical consolidated margins of 14% to 25% which had previously reflected the contributions from former subsidiary, Petra Energy Berhad (Petra Energy). The brownfield integrated services provider had previously accounted for 60% of consolidated group revenues.

MARC took note of the group’s effort to deleverage during FY2010; its debt-to-equity ratio declined to 0.49 times (x) (FY2009: 0.79x) subsequent to a right issue and private placement exercise which raised cash of RM111.7 million. The company redeemed note obligations totalling RM95 million in FY2011; a similar amount was redeemed the previous financial year. Apart from undrawn bank facilities, potential sources of liquidity to meet its forthcoming RM70 million bond maturities in FY2012 include proceeds from a private placement offering and/or the divestment of Petra Energy shares.

The negative outlook reflects the group’s large forthcoming bond maturities and MARC’s view that its near-term profitability and liquidity metrics will be close to the thresholds for the current rating, despite improving business conditions. The rating could come under downward pressure should Perdana Petroleum be unable to secure additional liquidity resources to pay down its upcoming bond obligations in FY2012.

The negative outlook could revert to stable once Perdana Petroleum exhibits a sustained ability to generate free cash flow and profitability in coming quarters, and if uncertainties relating to sources for forthcoming bond maturities are sufficiently addressed.

Sabesh Parameswaran, +603-2082 2260/;
Goh Shu Yuan, +603-2082 2268/;
Francis Xaviour Joe, +603-2082 2279/

Wednesday, November 23, 2011

RAM Ratings downgrades Texchem's rating, maintains negative outlook

Published on 18 November 2011
RAM Ratings has downgraded the long-term rating of Texchem Resources Bhd’s (“Texchem” or “the Group”) RM100 million Commercial Papers/Medium-Term Notes Programme (2005/2012), from A3 to BBB1, with a negative outlook. Concurrently, the short-term rating has been maintained at P2.

The downgrading of Texchem’s long-term rating is premised on its weakened business and financial performance. Three of the Group’s 5 divisions delivered a poorer-than-expected showing in the first 9 months of FYE December 2011 (“9M FY Dec 2011”). Texchem’s food division sank back into the red after it turned around in FY Dec 2010, while operational issues weighed down on its family-care division. Meanwhile, the Group’s polymer-engineering division, which has yet to recover from the previous downturn, is likely to continue facing tough operating conditions.
“Now into its 4th year of net losses, Texchem’s eroded shareholders’ funds and heftier debt load are undermining the strength of its balance sheet; the Group is highly leveraged, with an adjusted gearing ratio of 1.97 times as at end-September 2011. Moving forward, the Group’s adjusted gearing ratio is expected to deteriorate, mainly due to a heavier debt load. Should its losses persist, its shareholders’ funds would also be eroded,” observes Kevin Lim, RAM Ratings’ Head of Consumer and Industrial Ratings.

“Texchem is also viewed to have tight liquidity owing to its large proportion of short-term borrowings against its cash reserves,” adds Kevin. Nonetheless, RAM Ratings understands that Texchem is looking at unlocking value of some of its assets. We believe this will generate significant net cash inflows that will help to considerably strengthen its balance sheet and liquidity position.

In the meantime, the ratings also reflect Texchem’s established market position as well as its geographical and business diversity. Its expanding restaurant operations currently boast the largest chain of Japanese restaurants in Malaysia while the Group is also a major local insecticide manufacturer with noteworthy shares of the insecticide markets in several ASEAN countries. Elsewhere, Texchem’s industrial and polymer-engineering divisions have over 3 decades of operating track record. We opine its ability to penetrate the supply chain of large multinational corporations under its industrial and polymer-engineering operations is a testament to its competency and reliability.

The negative outlook on the long-term rating has been maintained premised on lingering concerns regarding Texchem’s weak business and financial performance amid the current devastating floods in Thailand, the slowdown of the global semiconductor industry, and the mounting economic woes of the United States and European nations. These may have a greater impact on the Group’s performance than expected. The ratings could be downgraded further if Texchem’s business performance deteriorates or its financial metrics do not improve, or its planned asset sale does not pan out. On the other hand, the outlook may be revised to stable if the Group is able to weather the current setbacks and its asset disposal results in a significantly stronger balance sheet.

Media contact
Ben Inn
(603) 7628 1024

Tuesday, November 22, 2011

International Reserves of BNM as at 15 November 2011

The international reserves of Bank Negara Malaysia amounted to RM429.7 billion (equivalent to USD135 billion) as at 15 November 2011. The reserves position is sufficient to finance 9.9 months of retained imports and is 4.1 times the short-term external debt.

RAM Ratings reaffirms New Pantai Expressway's debt ratings

Published on 18 November 2011
RAM Ratings has reaffirmed the respective AA3 and AA3(s) ratings of New Pantai Expressway Sdn Bhd’s (“NPESB” or “the Company”) RM490 million Senior Bai’ Bithaman Ajil Notes (2003/2014) (“Senior Notes”) and RM250 million Junior Bai’ Bithaman Ajil Notes (2003/2016) (“Junior Notes”); both the long-term ratings have a stable outlook. NPESB holds the concession for the construction, maintenance and toll collections of the 19.6-km New Pantai Highway (“NPH” or “the Highway”).
The rating of the Senior Notes remains supported by strong debt-coverage levels and the sustainable traffic-volume growth of the Highway, backed by established townships. In FY Mar 2011, average daily traffic (“ADT”) on the Highway climbed up 9.2% year-on-year (“y-o-y”) to 141,290 vehicles, buoyed by robust traffic flows at all 3 toll plazas - Pantai Dalam, PJS 2 and PJS 5. The positive momentum extended into 1Q FY Mar 2012, when ADT went up 8.8% y-o-y to 153,756 vehicles. Moving forward, NPESB is expected to maintain its robust debt-coverage levels, with projected minimum and average Senior Finance Service Coverage Ratios (“FSCRs”) of 2.00 times and 2.11 times (with cash balances, post-distribution), respectively, on payment dates.

Meanwhile, the enhanced rating of the Junior Notes reflects the strength of the corporate guarantee from IJM Corporation Berhad (NPESB’s ultimate holding company), pursuant to the Payment Guarantee that unconditionally and irrevocably guarantees the Junior Notes. Since the corporate guarantee is only applicable while the Senior Notes are still outstanding, the rating of the Junior Notes will revert to the stand-alone rating upon full redemption of the Senior Notes on 31 October 2014.
After the full redemption of the Senior Notes, NPESB’s buffer is expected to weaken when servicing the principal repayment on the Junior Notes, with Junior FSCRs (with cash balances, post-distribution) on payment dates of 1.35 times (fiscal 2016) and 1.27 times (fiscal 2017) due to its lumpy debt repayment of about RM120 million per annum. Given NPESB’s weaker debt coverage compared to its AA3-rated peers, we highlight that the Company’s ability to redeem the Junior Notes will be weakened if it decides to make distributions to its shareholder. Nonetheless, the credit metrics of the Junior Notes could improve if the Highway’s future traffic performance comes in above expectations. Similar to other toll-road concessionaires, however, NPESB is also exposed to regulatory and single-project risks.

Media contact
Lawrence Leong
(603) 7628 1187

Monday, November 21, 2011

Toyota restores Japan output to "near-normal levels"

Toyota Motor said it had restored vehicle output in Japan to "near-normal levels" on Monday, after severe flooding in Thailand disrupted supply chains.

Partial production at three Toyota factories in Thailand itself has also resumed.

Last month the carmaker was forced to cut production around the world.

The flooding in Thailand, the worst the country has seen in decades, has resulted in more than 600 deaths.

It has also forced many businesses to shut down.

Factory closures and other disruptions resulting from weeks of flooding have contributed to an 18.5% fall in Toyota's July to September profits.

The company has withdrawn its profit and vehicles sales forecasts due to continued uncertainty.


RAM Ratings reaffirms Gulf Investment Corporation's AAA/P1 ratings

Published on 18 November 2011
RAM Ratings has reaffirmed Gulf Investment Corporation GSC’s (“GIC” or “the Corporation”) respective long- and short-term financial institution ratings at AAA and P1. At the same time, the AAA ratings of the Corporation’s RM3.5 billion Sukuk Wakalah bi Istithmar Programme (2011/2031), RM600 million Senior Unsecured Bonds (2008/2013) and RM400 million Senior Unsecured Bonds (2008/2023) have also been reaffirmed. All the long-term ratings have a stable outlook.

GIC’s ratings remain supported by its privileged position within the Gulf Corporation Council (“GCC”) and the strong support from its shareholders. The latter is underlined by a USD1.1 billion capital injection, along with steady placement of deposits by the GCC central banks and government entities, amid the global financial crisis in 2008/09. With its shareholders comprising the governments of Kuwait, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Oman, GIC’s mandate is to support the development of private enterprises and economic growth within the GCC. Given its strategic role, the Corporation enjoys immunity and exceptions in terms of regional regulatory norms, including exemptions from asset nationalisation, currency controls and taxes.

Boosted by the robust performance of its key principal investments, GIC’s pre-tax profit strengthened to a respective USD151 million and USD95 million in FYE 31 December 2010 (“FY Dec 2010”) and 1H FY Dec 2011 (FY Dec 2009: USD91 million). With several more of its investments becoming operational soon, we expect contributions from its principal investment portfolio to increase further in the near future.

Nevertheless, we remain mindful that these assets are usually green-field projects that entail lengthy gestation periods before they can generate returns. Notably, the Corporation still maintains a sizeable portfolio of investment securities for income and risk-diversification purposes, following its deleveraging exercise during the global financial crisis. This portfolio mainly comprises high-quality investment securities from Europe and the United States. Based on its business model, GIC’s profit performance is susceptible to the inherent volatility of the financial markets and the performances of its key principal investments.

Meanwhile, GIC’s liquidity position is deemed healthy; financial support from its shareholders is expected to be readily extended, if required. We note that the Corporation has no scheduled debt redemption in FY Dec 2012. Backed by the accretion of profits and revaluation gains on its available-for-sale investments, GIC’s tier-1 and overall risk-weighted capital-adequacy ratios (“RWCARs”) had been lifted to 31.3% as at end-June 2011 (end-December 2009: 27.7%). The deleveraging of its balance sheet had eased its leverage ratio to 2.5 times as at the same date (end-December 2009: 3.5 times). In the near term, the Corporation will be taking a cautious stance on its investment strategy in view of the current uncertainties on the global economic front; the management intends to maintain its RWCAR at a minimum of 16% while capping its leverage ratio at 4 times.

Media contact
Sophia Lee
(603) 7628 1189

Thursday, November 17, 2011

RAM Ratings reaffirms MBF Cards' A2/P1 ratings, with stable outlook

Published on 15 November 2011
RAM Ratings has reaffirmed the respective long- and short-term ratings of A2 and P1 for MBF Cards (M’sia) Sdn Bhd’s (“MBF Cards” or “the Company”) RM600 million Commercial Papers/Medium-Term Notes Programme (2007/2014); the long-term rating has a stable outlook. MBF Cards is a non-bank credit-card issuer and merchant acquirer.
MBF Cards commands a firm foothold in the merchant-acquiring industry, where it is ranked second (in terms of merchant base) in Malaysia, with an estimated market share of about 16% as at end-June 2011. We expect the Company to continue deriving a significant portion of its earnings from this segment, underpinned by its stable position in this business. MBF Cards has also carved a niche in the local credit-card market, and is the largest among the 4 non-bank credit-card issuers. The domestic credit-card industry is highly competitive and subject to potential regulatory changes. Against this backdrop, retaining cardholders and protecting market share will be the Company’s key focus.

Over the years, MBF Cards’ profitability has remained robust, supported by its sturdy fee income and healthy net interest margin. The Company’s lucrative net interest margin is a function of its concentration on unsecured credit-card lending. On balance, MBF Cards’ asset quality is deemed more susceptible to adverse changes in economic conditions than banks whose loan portfolios are typically more diversified. In August 2011, MBF Cards ventured into personal lending, which has lower levels of income eligibility than credit cards. Although this business fetches high margins and will diversify the Company’s earnings base, we are cognisant of the risks of lending to low-to-medium-income consumers and will keep vigilant for signs of any potential impact on MBF Cards’ asset quality. Meanwhile, the Company’s gearing level stood at 2.3 times as at end-June 2011. This remained lower than those of the other non-bank financial institutions within RAM Ratings’ universe.

Media contact
Gladys Chua
(603) 7628 1049

Wednesday, November 16, 2011

RAM Ratings reaffirms Alliance Bank's A1/P1 ratings, with stable outlook

Published on 09 November 2011
RAM Ratings has reaffirmed Alliance Bank Malaysia Berhad’s (“Alliance Bank” or “the Group”) long- and short-term financial institution ratings at A1 and P1, respectively. Concurrently, the A2 rating of the Group’s RM1.5 billion Subordinated Medium-Term Notes Issuance Programme (2011/2026) (“Subordinated Notes”) has also been reaffirmed. Both long-term ratings have a stable outlook. The 1-notch difference between the rating of the Subordinated Notes and Alliance Bank’s long-term financial institution rating mirrors the subordinated nature of the former to the Group’s senior unsecured obligations.

Alliance Bank is the smallest among the 8 domestic banking groups in Malaysia, with about 2% of the system’s outstanding loans and deposits. Nevertheless, it maintains a notable presence in consumer loans and lending to small and medium-sized enterprises, which together account for 76% of Alliance Bank’s loan book. The latter was one of the key drivers of its 4.8% loan growth in FYE 31 March 2011 (“FY Mar 2011”).

Notably, ongoing progress in its asset quality has aligned Alliance Bank’s gross impaired-loan ratio - 3.0% at end-June 2011 - with the industry average. Meanwhile, its credit-cost ratio is forecast to come in at a healthy 0.30% in FY Mar 2012, with full provisions made on its exposure to collateralised loan obligations. In the absence of such impairment losses, the Group recorded a healthier pre-tax profit of RM596.1 million in FY Mar 2011, and appears on track towards a better showing in fiscal 2012.

Alliance Bank’s strong deposit growth in FY Mar 2011, in contrast to its relatively modest loan expansion, had resulted in an improved loans-to-deposits ratio of 76.1% as at end-June 2011 (end-March 2010: 85.31%). However, this is expected to trend upwards as its lending momentum gathers pace. We note that the Group’s tier-1 risk-weighted capital-adequacy ratio remained healthy at 11.3% as at end-June 2011 (end-March 2010: 11.1%).

Media contact
Amy Lo
(603) 7628 1078

Tuesday, November 15, 2011

RAM Ratings reaffirms Alliance Financial Group' ratings, with stable outlook

Published on 09 November 2011
RAM Ratings has reaffirmed the respective long- and short-term ratings of Alliance Financial Group Berhad’s (“AFG” or “the Company”) RM300 million Commercial Papers/Medium-Term Notes Programme (2006/2013), at A2 and P1; the long-term rating has a stable outlook. The ratings depend on the credit strength of its core subsidiary, Alliance Bank Malaysia Berhad (“Alliance Bank”), as well as AFG’s company-level financial metrics. Alliance Bank is the smallest among the 8 domestic banking groups in Malaysia; it carries A1/Stable/P1 financial institution ratings from RAM Ratings.

AFG’s financial performance relies heavily on dividends from its subsidiaries, which account for the bulk of its revenue. In this regard, stable dividends from Alliance Bank continue to underpin AFG’s sound financial profile. Backed by more robust dividend income, AFG recorded a higher return on capital employed of 6.6% as at end-March 2011 (end-March 2010: 6.1%). Its financial leverage compares well against that of its rated peers; the Company retained its net-cash position as at end-June 2011. At the same time, its gearing and double-leverage ratios remained stable at a conservative 0.33 times and 0.97 times, respectively.
Alliance Bank maintains its franchise in consumer loans as well as lending to small and medium-sized enterprises; these account for a combined 76% of its loans. The latter was one of the key drivers of its 4.8% loan growth in FYE 31 March 2011. Moving forward, Alliance Bank’s asset-quality indicators are expected to remain stable and in line with the industry averages, as evidenced by its gross impaired-loan ratio of 3.0% as at end-June 2011. At the same time, its capitalisation remained healthy, with a tier-1 risk-weighted capital-adequacy ratio of 11.3% (end-March 2010: 11.1%).

Media contact
Amy Lo
(603) 7628 1078

Friday, November 11, 2011

The Malaysia Reserve - 9 November 2011 - Page 7

Article in the Malaysian Reserve where I was quoted. First article, fourth column.



Oct 13, 2011 -
MARC has affirmed its issue rating of AAA on Oversea-Chinese Banking Corporation Limited's (OCBC) redeemable subordinated bond of up to RM2.5 billion with a stable outlook. The affirmed issue rating reflects the franchise strength of the financial services group, its relatively good earnings stability, and very strong regulatory capitalisation. MARC further notes that the continued deepening of OCBC's banking franchise in Indonesia and China has been achieved in the context of robust risk management framework and good overall control of costs. The issue rating does not reflect any notching for subordination on the basis of the well secured position of the subordinated bonds in OCBC's capital structure.

The bank enjoys a strong business position in its home market of Singapore with a market share of 18% in loans and 15% in deposits. Its insurance subsidiary, Great Eastern Holdings (GEH), maintains a market leading position in life insurance in Singapore and Malaysia and continues to show profitable organic growth. The group's bancassurance strategy continues to provide important growth opportunities for its life business.

OCBC Group reported a marginally lower core net profit of SGD1,173 million for the first six months to June 30, 2011 (1H2011) compared to last year's first half profit of SGD1,179 million. In 1H2011, the group posted a year-on-year increase in net interest income of 13% on robust loan growth in Singapore and key markets overseas, led mostly by corporate loans. The rapid loan growth in the 1H2011 helped mitigate the impact of net interest margin compression and provide earnings momentum. Also observed was strong growth in its revenue from insurance, private banking, and other asset and wealth management activities. MARC believes that the group's core profitability should be sustained by balanced loan growth combined with stable asset quality and good overall cost management.

The improvement in the bank's asset quality in recent periods follows a fairly mild deterioration in 2009. The relative resilience of its asset quality to the economic downturn owes in large part to its granular credit portfolio with its small and medium-sized enterprises (SME) and retail banking focus. MARC views the bank's asset quality indicators as robust. In line with the general trend in the industry, OCBC's gross non-performing loans (NPL) declined by SGD82 million in 1H2011, translating into a gross NPL ratio of 0.8% at June 30, 2011.The bank's loan loss reserve coverage of total NPAs has increased to 123.2% as at June 30, 2011 mostly on account of general provisions set aside to support its strong loan growth.
OCBC has consistently maintained a very strong capital position, with Tier 1 and total capital adequacy ratios of 15.4% and 17.0% respectively as at June 30, 2011. The present high levels of regulatory capital in its operating insurance subsidiaries in Singapore and Malaysia provides some added comfort. Management has indicated that OCBC's transition to new Basel III rules (under which Tier 1 capital requirements will increase to 7% by 2013) will be aided, amongst others, by earnings retention, capital preservation measures such as its scrip dividend scheme.

The stable rating outlook reflects MARC's expectations that OCBC is likely to maintain its strong financial profile and that the rating is comfortably positioned at its current rating level.

Ahmad Rizal Farid, +603-2082 2253/;
Anandakumar Jegarasasingam, +603-2082 2250/

Thursday, November 10, 2011

RAM Ratings reaffirms FEC Cables' AA2(s)/P1(s) ratings

Published on 13 October 2011
RAM Ratings has reaffirmed the respective enhanced long- and short-term ratings of AA2(s) and P1(s) for FEC Cables (M) Sdn Bhd’s (“FEC Cables” or “the Company”) RM130 million Islamic Medium-Term Notes Facility (2006/2019) and RM20 million Murabahah Underwritten Notes Issuance Facility (2006/2013) (collectively known as “the sukuk”); the long-term rating has a stable outlook. FEC Cables manufactures and sells power and telecommunication cables.

The enhanced ratings remain supported by the strongly worded letter of support (“LoS”) from Permodalan Nasional Berhad (“PNB”), the Company’s largest shareholder. This document states that PNB will ensure – either by equity, loans, grants and/or other means – that FEC Cables meets its financial obligations on the sukuk in a full and timely manner. The explicit support from PNB enhances the credit profiles of the sukuk beyond FEC Cables’ stand-alone credit risk. The LoS is, however, perceived as being short of an outright guarantee.

“RAM Ratings’ qualitative assessment also takes into consideration PNB’s past financial assistance to FEC Cables and its active involvement in the Company’s strategic direction. In this regard, we expect PNB to continue providing financial assistance to FEC Cables should the need arise,” points out Kevin Lim, Head of Consumer & Industrial Ratings.

Excluding the LoS, FEC Cables’ stand-alone credit profile is weak. The Company remained highly leveraged with its gearing ratio at 3.40 times as at end-December 2010. At the same time, its cashflow-protection metrics remain subdued by its weak-cashflow generating ability against its heavy debt burden. Meanwhile, FEC Cables is exposed to high customer-concentration risk as its 2 biggest customers, Tenaga Nasional Berhad and Telekom Malaysia Berhad, collectively accounted for more than 75% of its revenue in fiscal 2010. On top of operating in a keenly competitive environment, the Company is also susceptible to the price volatility of raw materials.

Media contact
Evelyn Khoo
(603) 7628 1075

Asian stocks open sharply lower on new eurozone fears

Asian stock markets opened sharply lower on Thursday after Italy's record-high cost of borrowing renewed fears over the eurozone crisis.

Japan's Nikkei index fell 2.3%, Australia's ASX was down 2.8% while South Korea's Kospi opened 2.6% lower.

The falls in Asian markets follow losses in US markets.

The cost of borrowing on Italian government bonds jumped to 7% on Wednesday, a level considered unsustainable by economists.


RAM Ratings reaffirms AAA rating of Danga's RM10 billion Multi-Currency Islamic Securities Programme

Published on 10 October 2011
RAM Ratings has reaffirmed the AAA rating of Danga Capital Berhad’s (“Danga”) RM10 billion Multi-Currency Islamic Securities Programme (“ISP” or “the Islamic securities”); the long-term rating has a stable outlook.
The rating reflects the credit strength of Khazanah Nasional Berhad (“Khazanah” or “the Company”), in its role as the Purchase Undertaking Obligor in this transaction. Proceeds from the ISP will be utilised to purchase pools of identified Shariah-approved shares and/or assets from Khazanah. The Company will top up any shortfall in the income generated by the Musyarakah venture; it has also undertaken to purchase the specific portfolio units from Danga at a pre-agreed price upon maturity or a dissolution event.

“Khazanah’s credit profile hinges on its strategic position as the investing fund of the Malaysian Government. This accords it superior financial flexibility in terms of access to the capital markets, supported by the quality of its diversified portfolio,” notes Siew Suet Ming, RAM Ratings' Head of Structured Finance Ratings. Given the Company’s strategic role, RAM Ratings believes that the likelihood of an extraordinary support from the Malaysian Government, if required, is very high.
Khazanah’s debt-servicing aptitude is primarily supported by dividend receipts, equity divestments and, to a smaller extent, its refinancing ability. The Company’s top line rebounded to RM5 billion in fiscal 2010 (+45.6%), supported by more robust dividend income and divestment gains. However, its profit performance was affected by RM2.1 billion of impairment losses, which suppressed its return on capital employed to 3.2% (fiscal 2009: 3.8%). Looking ahead, we expect Khazanah’s short-term financial performance to be subdued, given the uncertain global financial and economic landscapes.

As at end-2010, Khazanah’s balance sheet has a reasonably high level of borrowings at RM36 billion. Excluding amounts owed to related companies, its gearing ratio stood at 1.7 times as at the same date. On a more positive note, its operating profit before depreciation, interest and tax debt coverage broadened from 0.08 times to 0.13 times over the same period, underpinned by its sturdier top line. Looking ahead, Khazanah is likely to stay highly leveraged over the medium term as it may not be able to quickly monetise its new investments given their long gestation periods. Notably, the Company received a RM3 billion equity infusion from the Malaysian Government this year, as part of the RM10 billion of funding for Khazanah under the Second Stimulus Package (announced in 2009); its gearing level is estimated to have eased to about 1.6 times following this equity injection.

Media contact
Peter Su
(603) 7628 1036

Wednesday, November 9, 2011

Asian shares rise after Berlusconi's resignation pledge

Asian markets posted modest gains after Italian Prime Minister Silvio Berlusconi said he would step down, boosting optimism that problems in the eurozone may ease.

Japan's main index rose 1%, South Korea was up 1% and Australia gained 1.5%.

US markets had gained earlier on the news.

Investors have been worried that Italy's high debt levels and low growth rate could see it struggle to repay its government bonds.


RAM Ratings reaffirms AAA/P1 ratings of Rantau Abang's RM10 billion Sukuk Musyarakah

Published on 10 October 2011
RAM Ratings has reaffirmed the AAA/P1 ratings of Rantau Abang Capital Berhad’s (“RACB”) RM3 billion Islamic Commercial Papers/Medium-Term Notes Programme. At the same time, the AAA rating of its RM7 billion Islamic Medium-Term Notes Programme has also been reaffirmed. Both long-term ratings have a stable outlook. The securities are collectively known as “the Sukuk Musyarakah”.

Under the transaction, a Musyarakah partnership had been established between Khazanah Nasional Berhad (“Khazanah” or “the Company”) and RACB; the capital returns and periodic profit payments on the Sukuk Musyarakah stem from an investment portfolio consisting of Shariah-approved shares and assets owned by Khazanah. The ratings of the Sukuk Musyarakah ultimately reflect the credit strength of Khazanah, in its capacity as the Purchase Undertaking Obligor; the Company will purchase the specific portfolio units from RACB at a pre-agreed price upon maturity or a dissolution event.

“Khazanah’s credit profile hinges on its strategic position as the investing fund of the Malaysian Government. This accords it superior financial flexibility in terms of access to the capital markets, supported by the quality of its diversified portfolio,” notes Siew Suet Ming, RAM Ratings' Head of Structured Finance Ratings. Given the Company’s strategic role, RAM Ratings believes that the likelihood of an extraordinary support from the Malaysian Government, if required, is very high.
Khazanah’s debt-servicing aptitude is primarily supported by dividend receipts, equity divestments and, to a smaller extent, its refinancing ability. The Company’s top line rebounded to RM5 billion in fiscal 2010 (+45.6%), supported by more robust dividend income and divestment gains. However, its profit performance was affected by RM2.1 billion of impairment losses, which suppressed its return on capital employed to 3.2% (fiscal 2009: 3.8%). Looking ahead, we expect Khazanah’s short-term financial performance to be subdued, given the uncertain global financial and economic landscapes.

As at end-2010, Khazanah’s balance sheet has a reasonably high level of borrowings at RM36 billion. Excluding amounts owed to related companies, its gearing ratio stood at 1.7 times as at the same date. On a more positive note, its operating profit before depreciation, interest and tax debt coverage broadened from 0.08 times to 0.13 times over the same period, underpinned by its sturdier top line.

Looking ahead, Khazanah is likely to stay highly leveraged over the medium term as it may not be able to quickly monetise its new investments given their long gestation periods. Notably, the Company received a RM3 billion equity infusion from the Malaysian Government this year, as part of the RM10 billion of funding for Khazanah under the Second Stimulus Package (announced in 2009); its gearing level is estimated to have eased to about 1.6 times following this equity injection.

Media contact
Peter Su
(603) 7628 1036

RAM Ratings reaffirms AAA rating of Tresor Assets' Tranche H Senior Bonds, with stable outlook

Published on 06 October 2011
RAM Ratings has reaffirmed the AAA rating of Tresor Assets Berhad’s (Tresor) RM75 million Tranche H Senior Bonds, with a stable outlook; the RM25 million Tranche H Subordinated Bonds are not rated. The stable outlook reflects our view that the performance of Tranche H’s securitised loan pool (the Portfolio) will remain satisfactory throughout the transaction’s tenure.

Tresor is a special-purpose vehicle set up to undertake a RM1.5 billion funding programme involving receivables purchased from RCE Marketing Sdn Bhd (RCE Marketing). RCE Marketing is a wholly-owned subsidiary of RCE Capital Bhd and is involved in the business of providing personal loans through strategic tie-ups with cooperatives. Tranche H represents the 8th issuance (out of 9 issued to date) under this RM1.5 billion programme. The Tranche H Bonds are secured against a pool of personal loans originated by Koperasi Wawasan Pekerja-Pekerja Berhad (KOWAJA), and feature loans with tenures of up to 15 years. As at end-June 2011, RM75 million of the Tranche H Senior Bonds remained outstanding, supported by RM74.84 million of outstanding receivables and RM41.29 million of cash and permitted investments that correspond to a collateralisation level of 154.84%.

The reaffirmation of the rating is premised on the available credit enhancement provided by the overcollateralisation level, available excess spread, structural features of the transaction and performance of the Portfolio. As at 30 June 2011, the receivables pool recorded a cumulative net default rate of 2.32% (as a percentage of the original principal balance on the purchase date), compared to RAM Ratings’ base-case assumption of 3.99%. At the same time, the cumulative prepayment rate stood at 20.73%, translating into an average monthly prepayment rate of 1.73% which is in line with our assumptions. As at end-June 2011, the Portfolio contained 3,924 loans, with a weighted-average seasoning of 18 months; the average loan size worked out to RM19,072 with a weighted-average remaining term-to-maturity of 125 months.

In November 2010, RAM Ratings had highlighted Suruhanjaya Koperasi Malaysia’s (SKM) directive to KOWAJA to halt the disbursement of new loans - effective 1 December 2010 - as KOWAJA's financing arrangement with RCE Marketing had been deemed non-compliant by SKM. We had also emphasised that the performance of Tresor’s securitised loan portfolios would not be affected; the salary-deduction mechanism for existing loan receivables remained intact.

On 8 June 2011, KOWAJA received SKM’s approval to obtain funding from RCE Marketing, subject to certain operational and funding conditions as well as a funding limit of RM200 million. Under the new financing scheme, KOWAJA is not permitted to assign its receivables to any third party (including RCE Marketing), although it can assign the proceeds of such receivables. This new arrangement will expose RCE Marketing to KOWAJA's credit risk; RCE Marketing’s financial profile could be affected if KOWAJA fails to fulfil its loan obligations. At the same time, without an available pool of receivables from KOWAJA, RCE Marketing’s ability to seek funding through its existing securitisation programme – currently its primary source of funding – will be curtailed.

Despite the abovementioned challenges to RCE Marketing’s future business and financial profile, RAM Ratings reiterates that they do not affect the ratings of the Tranche H Senior Bonds as the performance of the underlying securitised loan pool and the security position of the bondholders remain intact. Essentially, receivables that were securitised prior to SKM directive will not be affected. That said, in the event that RCE Marketing’s credit profile deteriorates significantly, which we do not envisage at this juncture, its ability to function as the Servicer of this transaction could be affected.

In light of the security arrangements under the transaction, the management of the relevant accounts depends heavily on RCE Marketing. Should RCE Marketing fail in its role as the Servicer, cashflow to the bondholders may be temporarily disrupted until a replacement servicer is appointed. Nonetheless, we opine that this risk is still manageable in view of RCE Marketing’s moderate credit profile. We note that RCE Marketing has to date adequately performed its duties as the Servicer under this debt programme, with monthly servicer reports received on a timely basis.
RAM Ratings highlights that the AAA rating addresses the likelihood of timely payment of coupons and ultimate payment of principal on the Tranche H bonds by their respective maturity dates; it does not indicate the likelihood of prepayment.

Media contact
Woon Tien Ern
(603) 7628 1040

Friday, November 4, 2011


Nov 3, 2011 -
MARC has removed its MARC-1/A+ ratings on Radicare Sdn Bhd’s RM100 million CP/MTN facility from MARCWatch Negative following a six-month extension of its hospital support services concession which expired on October 28, 2011. The recent extension has alleviated near-term downward pressure on the company’s debt rating. Radicare’s issue ratings are affirmed at MARC-1/A+ with a negative outlook. MARC had placed Radicare’s MARC-1/A+ ratings on MARCWatch Negative on June 28, 2011 due to increased uncertainty regarding the extension of its expiring concession.

MARC understands that the company intends to utilise the remaining RM53 million available for drawdown under the facility. While the government’s decision in granting a six-month extension allays some concerns regarding the risk of non-renewal of its concession, the continuing uncertainty over new concession terms and the likely impact on Radicare’s business and financial profile do not support a return to a stable rating outlook. MARC further notes the recent lengthening of Radicare’s collection period and the increased potential for timing mismatches between cash flows from trade receivables and obligations on the rated notes. A key offset to the risks in MARC’s view is Radicare’s on-balance sheet trade receivables of RM188 million as of September 30, 2011, the bulk of which is due from the government and cash and cash equivalents on hand of RM43.5 million (excluding sinking fund balances of RM4.4 million). All outstanding notes under the rated facility continue to be fully backed by assigned receivables from the government.

MARC will closely monitor developments with respect to Radicare’s concession and its credit profile to resolve the negative outlook.

Nisha Fernandez, +603-2082 2269/;
Rajan Paramesran, +603-2082 2233/

Wednesday, November 2, 2011

How does one get on a headhunter list?

Headhunter spends most of their time researching, interviewing, meeting, and qualifying key players within their specialized industry or niche. A recruiter, based on the number and variety of positions for which they recruit, may search and contact the entire spectrum of people within their niche. It’s of value to them to know and understand what motivates everyone they meet—both candidates and hiring managers.

So back to the question how does one get on a headhunter list ? I share with you some tips which you can try :
  • If you are top graduates from reputable universities (eg. Oxford, Havard, MIT, Cambridge etc), you will have better chance. Pro-active headhunter will approach top universities to ensure the cream of the crop of fresh graduates, are given to their client.
  • Keep in touch with your former students in the industry, you can find many in
  • Get your free account at and start building your network. Linkedin is a platform for professional in various industries, expertise to get connected.
  • Create online accounts at job portal like and The headhunter uses the resume database in these popular portal to source for the talent for jobs they are tasked to fill.
  • Submit your resume at as well!
  • Work in a Company which is a market leader in their Industry. For example, if automotive Proton (because Proton has full fledge of car manufacturing in Malaysia). You will starts receiving call as the staff at market leader company normally high sought after.
  • Build up a close contact with headhunter as whenever they have task suitable with your experience/qualification, you will have better chances. You can get the list of headhunter here.
  • Participate in any forum/conference related with your industry and get connected.
  • Don’t forget to meet headhunter during career fair, normally they will take part in such event.
  • Do perform in your current job, and this will spread out quickly in the industry.

Tuesday, November 1, 2011

RAM Ratings reaffirms A1(bg) rating of Great Union Properties' debt facility

Published on 06 October 2011
RAM Ratings has reaffirmed the enhanced long-term rating of A1(bg) for Great Union Properties Sdn Bhd’s (GUP or the Company) RM105 million Bank-Guaranteed Serial Bonds (2002/2012) (the Bonds), with a stable outlook. The enhanced rating reflects the unconditional and irrevocable guarantee extended by a consortium of rated financial institutions. The backing of the bank guarantee enhances the credit profile of the Bonds beyond GUP’s stand-alone credit strength; repayment risks associated with the Bonds will be absorbed by the guarantor banks.

GUP is the owner and developer of the 910-room Renaissance Kuala Lumpur Hotel (Renaissance KL or the Hotel), which is strategically located in the heart of Kuala Lumpur. The Company is a 50:49 joint venture between IGB Corporation Berhad (IGB) and Stapleton Development Limited; the latter is a subsidiary of Hong Kong-based conglomerate New World Development Company Limited (NWD). IGB is listed on the Main Market of Bursa Malaysia while NWD is quoted on the Hong Kong Stock Exchange.

Excluding the bank guarantee, GUP’s stand-alone credit strength reflects the strong financial backing from its shareholders, as demonstrated by both parties’ track record of providing advances to aid GUP in meeting its financial obligations. We expect further shareholders’ support to be forthcoming, going forward. On this note, both IGB and NWD have healthy credit positions, underpinned by their sturdy business profiles and financial metrics. Meanwhile, Renaissance KL is an established hotel, with a 15-year track record in the industry. However, the Hotel’s competitive position has weakened in recent years amid stiff competition within the local hospitality sector and its lack of major refurbishment. While some refurbishment had been carried out since 2009, there has not been significant positive impact to date. Similar to its peers, Renaissance KL is also vulnerable to event risks, including health scares, economic upheavals and various other external factors that influence the hospitality and tourism industry.

Media contact
Anne Yap
(603) 7628 1038


Oct 5, 2011 -
MARC has affirmed its AAA(bg) and MARC-1(bg) ratings on Mega Palm Sdn Bhd’s (Mega Palm) Bank Guaranteed Medium Term Notes (BG MTN) of up to RM70.0 million and Bank Guaranteed Commercial Papers (BG CP) of up to RM80.0 million respectively. The outlook for the ratings is stable. The rating action affects outstanding BG MTN of RM10.0 million and BG CP of RM46.8 million. The affirmed ratings and stable outlook reflect MARC’s ratings of AAA/MARC-1 on Malayan Banking Berhad (Maybank), which has provided an unconditional and irrevocable guarantee on the MTN and CP. Maybank’s ratings reflect the bank’s entrenched market position as the largest commercial bank in Malaysia, its established franchise, its sound asset quality and its favourable financial profile.

Mega Palm is the developer of a Country Heights Damansara (CHD), a 196-acre high-end residential project located along SPRINT highway in Kuala Lumpur. Operating trends were somewhat more positive in 2010 with sales of bungalow lots faring better. The number of bungalow lots sold increased to 19 from 10 in the previous year due to more competitive pricing. New homes sales, however, remained sluggish; since the project’s launch in 2001, only six units of bungalows have been sold to date. MARC notes that Mega Palm has revised its development plan for CHD to provide for the sale of a 13.4-acre land parcel that was previously held for cluster bungalow development. With the change in development plans, the project has 19.8 acres of remaining land to develop with an estimated gross development value of RM230.0 million. MARC believes that revenue from land sales will continue to be the primary contributor to Mega Palm’s earnings and cash flow for the foreseeable future.

The company’s revenues almost doubled to RM63.1 million for the 12 months ended December 31, 2010 (FY2010) (FY2009: RM32.7 million) while its pre-tax profit rose to RM19.0 million in FY2010 (FY2009: RM6.3 million). Mega Palm’s debt-to-equity ratio declined to 0.83 times (FY2009: 1.01 times) on the back of a repayment of RM5.0 million BG CP during the year. With its redemption of BG MTN amounting to RM30.0 million on May 25, 2011, Mega Palm’s DE would improve to 0.54 times on a pro-forma basis. Mega Palm’s financial flexibility remains modest as implied by its internal liquidity position; only RM14.5 million of its total cash position of RM44.3 million is unencumbered.

BG MTN and BG CP noteholders are insulated from downside risks in relation to Mega Palm’s credit profile by virtue of the guarantees provided by Maybank. Any changes in the supported ratings or ratings outlook will be primarily driven by changes in Maybank’s credit strength.

Darrell Lim, +603-2082 2261/;
Rajan Paramesran, +603-2082 2233/
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