Thursday, February 28, 2013
Published on 27 February 2013
RAM Ratings has reaffirmed the respective long- and short-term ratings of A1 and P1 for Blondal Resources Sdn Bhd’s (“BRSB”) RM70 million Commercial Papers and Medium-Term Notes Programme (“CP/MTN”); the long-term rating has a stable outlook. BRSB had been specifically incorporated to undertake the securitisation of the hire-purchase receivables of Blondal Sdn Bhd’s (“Blondal”) subsidiary – Primuda Sdn Bhd – via the issuance of the CP/MTN. Blondal is involved in direct sales of household and industrial appliances, primarily under the Lux, Städa and HydroGuard brands.
The reaffirmation of the ratings is premised on the available collateralisation cover supporting the CP/MTN. As at end-August 2012, BRSB had RM11.00 million of outstanding CP, supported by RM20.55 million of HP receivables (“the Portfolio”); this resulted in a collateralisation level of 208% against the covenanted 180% that must be maintained at all times. The greater-than-required asset coverage – a result of Blondal’s replacement of defaulted and repossessed accounts as per the transaction requirements – provides additional cushion against any further increases in the net default levels of the Portfolio.
As at end-August 2012, the cumulative peak net default rate of the securitised pool since issuance stood at 7.22%, i.e. higher than our base-case assumption of 6.50%. We note, however, that newer receivables are no longer representative of the Portfolio’s historical performance. Notably, newer receivables derived from the purchase of point-of-entry products (which now form more than 90% of the securitised pool, consistent with the shift in Blondal’s product range) show lower cumulative net default rates of 6.00% to 6.50%. As such, we have maintained our base-case assumption. Meanwhile, the repossession and prepayment rates of the Portfolio have remained within our expectations, standing at a respective 17.83% and 0.32% as at end-August 2012.
We highlight that the transaction’s performance relies on Blondal’s ability to sustain its business volume, to replenish the portfolio following losses and also to refinance the outstanding CP falling due as the transaction approaches its legal maturity. On this note, Blondal’s average originated monthly receivables of RM3.7 million are deemed more than adequate to cope with the average required replacement of RM0.6 million. Failure to replace these receivables will lead to an early amortisation event. As of end-August 2012, Blondal had replaced RM26.88 million of “losses arising from defaults and repossession” with RM35.89 million of new receivables. Based on its latest available financials, Blondal returned to profitability in FY Dec 2011 and is on track to achieve another year of operating profit for FY Dec 2012. Its balance sheet, however, is moderately geared with debt/equity ratio of 0.9 times. Overall, its credit profile is viewed to have moderate cashflow-coverage metrics.
Lim Chern Yit
(603) 7628 1035
MARC has affirmed the ratings of ABS Logistics Berhad's (ALB) Senior Sukuk Ijarah comprising RM100.0 million of Class A, RM20.0 million of Class B and RM40.0 million of Class C sukuk at AAAIS, AAIS and AAAIS(bg) respectively
MARC has affirmed the ratings of ABS Logistics Berhad's (ALB) Senior Sukuk Ijarah comprising RM100.0 million of Class A, RM20.0 million of Class B and RM40.0 million of Class C sukuk at AAAIS, AAIS and AAAIS(bg) respectively. The rating action affects the outstanding amounts under the respective classes of RM75.0 million, RM20.0 million and RM40.0 million. The outlook on the ratings for Class A and B sukuk has been revised to stable from negative. The outlook revision reflects reduced pressure on credit profile of the transaction's originator and lessee, Tiong Nam Logistics Holding Berhad (Tiong Nam) since MARC's last review. Whilst Tiong Nam's recent results indicate an improvement in profitability and cash flow generation, the logistics service provider's free cash flow generation remains negative and its high gearing and slim covenant headroom continue to constrain its credit profile.
The ratings of the Class A and Class B sukuk are underpinned by the stable performance of the collateral properties, satisfactory loan-to-value (LTV) ratios for the sukuk and robust debt service coverage levels. Meanwhile, the enhanced rating of the Class C sukuk benefits from an unconditional and irrevocable guarantee from Malayan Banking Berhad, on which MARC maintains a financial institution rating of AAA/stable. The ratings of Class A and Class B will be affected by credit deterioration on the part of the lessee, Tiong Nam given that Tiong Nam's credit risk cannot be de-linked from the transaction. Should actual net operating income generated by the collateral properties fall short of its ijarah servicing obligations under the sukuk, the transaction's performance would be dependent on Tiong Nam's ability to make up the shortfall.
The securitised properties which have a combined net lettable area of 1.1 million square feet (sq ft), are located strategically in established industrial areas across seven states in Peninsular Malaysia and supported by a stable tenant base. As at September 30, 2012, the occupancy rate of the securitised properties improved to 95.0% as compared to 93.7% as at March 2012. Although the leases of the securitised properties are short term, averaging three years, renewal risk is somewhat mitigated by a low tenant turnover rate. Most of the tenants have been with Tiong Nam for over ten years, however, some tenant concentration risk is seen with ten of the largest tenants account for more than 57.3% of the annual gross rental generated by securitised properties.
During the period under review (April 1, 2012 to September 30, 2012), the securitised properties generated net operating income (NOI) of RM14.8 million, slightly above the required ijarah payments of RM14.5 million. The LTV ratios for the Class A and Class B sukuk are 51.9% and 65.7% respectively based on MARC's valuation of RM144.5 million, derived from an assumed stabilised NOI of RM14.5 million at a capitalisation rate of 10%. The high LTV ratios are high for their respective rating bands, however, Class A's amortisation schedule is expected to facilitate a reduction in LTVs to 27.7% and 41.5% at the expected maturity date. The respective debt service coverage ratios (DSCR) of Class A and Class B sukuk for the period under review were 4.6 times and 4.1 times, above the minimum rating requirements of 2.2 times and 1.9 times.
Tiong Nam posted an operating profit of RM14.7 million in 1HFY2013 compared to negative RM0.1 million in the previous corresponding period. The turnaround in its performance was supported by the higher rental income (1HFY2013: RM8.0 million; 1HFY2012: RM3.8 million) and occupancy rates in the warehouse segment as well as some margin recovery in the transportation segment. In line with the better profitability, Tiong Nam achieved RM14.7 million in cash flow from operation (1HFY2012: negative RM3.3 million). Nonetheless, MARC notes that the group has been investing heavily in the property letting and warehousing segments and land acquisitions, resulting in negative free cash flow of RM2.4 million in 1HFY2013. The company's expansion plans were mainly funded by borrowings with its total debt increasing to RM305.6 million during 1HFY2013 (1HFY2012: RM223.7 million). Consequently, its debt-to-equity ratio rose to 1.06 times (1HFY2012: 0.8 times), edging closer to the gearing ratio limit of 1.2 times allowed under the terms of the Sukuk Ijarah Programme.
Negative pressure on the ratings of Class A and Class B sukuk could derive from deterioration in the performance of the collateral properties or Tiong Nam's credit profile.
Contacts: Ng Chun Kean, +603-2082 2230/ email@example.com; Jason Kok, +603-2082 2258/ firstname.lastname@example.org; David Lee, +603-2082 2255/ email@example.com.
February 26, 2013
Wednesday, February 27, 2013
MARC affirms its ratings of Sistem Penyuraian Trafik KL Barat Sdn Bhd's (SPRINT) RM510 million Al Bai Bithaman Ajil Islamic Debt Securities (BaIDS) and RM365 million Bank Guaranteed Serial Fixed Rate Bonds (BG Bonds) at A+ID and AA-(bg) respectively
MARC affirms its ratings of Sistem Penyuraian Trafik KL Barat Sdn Bhd's (SPRINT) RM510 million Al Bai Bithaman Ajil Islamic Debt Securities (BaIDS) and RM365 million Bank Guaranteed Serial Fixed Rate Bonds (BG Bonds) at A+ID and AA-(bg) respectively. The outlook on the ratings is stable. SPRINT is the concession owner and operator of the 25.5km SPRINT highway consisting of the Damansara Link, Kerinchi Link and Penchala Link situated to the west of Kuala Lumpur.
The rating and outlook of the BG Bonds are underpinned by the credit strength of SPRINT's three guarantor banks, Public Bank Berhad, AmInvestment Bank Berhad and RHB Bank Berhad. In line with MARC's weakest link approach, the rating of the BG Bonds reflects lowest rating of the three banks which is AA-/Stable. Any changes to the rating and outlook on the BG Bonds would be largely underpinned by changes of the credit quality of the guarantor banks.
The non-guaranteed rating of the BaIDS reflects SPRINT's standalone credit profile which is supported by the satisfactory traffic performance of the highway which was largely in line with the independent traffic forecast of May 2011, as a result of which, actual operating profit and cash flow from operations (CFO) remain within MARC's expectations. Moderating the rating is the sensitivity of SPRINT's liquidity position to delays in the receipt of compensation paid by the government for deferring scheduled toll hikes.
The deferment of toll hikes of the Damansara Link and Kerinchi Link since 2008 and the Penchala Link since 2010 has also supported traffic growth which has surpassed projections in the first eleven months of 2012 (11M2012). The latest projections by Halcrow Consultants Sdn Bhd had incorporated toll hikes in 2012 per the toll schedule under the concession agreement. The Damansara Link had also benefited from the upgrade of the Taman Tun Dr Ismail (TTDI) interchange linking to the Lebuhraya Damansara-Puchong (LDP). The upgrade involved the construction of a flyover and underpass which significantly eases congestion and allows for smoother traffic flow from the Damansara Link to the Bandar Utama and Kota Damansara areas.
For the 11M2012 period, traffic on the Damansara Link and Kerinchi Link grew at an annualised rate of 4.0% and 5.8% respectively (2011: 1.8%, 6.8%), while traffic on the Penchala Link was below projections, showing an annualised growth of only 3.6% (2011: 7.9%). For the first four months of SPRINT's financial year ending March 31, 2013 (4MFY2013), the company recorded revenue and pre-tax loss of RM56.9 million and RM3.1 million respectively. Government compensation for the deferment of toll hikes accounted for RM19.2 million or a third of the company's revenue. Given the sizeable portion of SPRINT's revenue that takes the form of government compensation, SPRINT's liquidity is dependent on timely receipt of the government compensation. MARC notes that the payment for balance of compensation for the 2011 calendar year of RM23.5 million and advance compensation for 2012 of RM32.2 million was made on September 14, 2012. MARC is mindful that SPRINT's liquidity position will exhibit increased sensitivity to the timeliness of government compensation payments should the compensation amounts increase as a result of further toll hike deferments.
For the full financial year ended March 31, 2012 (FY2012), SPRINT recorded revenue and pre-tax loss of RM163.7 million and RM18.9 million respectively (FY2011: RM156.5 million, RM53.5 million). The narrowing losses were mainly due to lower amortisation of the company's highway development expenditure. The company's cash flow from operations (CFO) had improved to RM136.4 million (FY2011: RM104.9 million) and was sufficient to meet its principal and profit payments of RM60.0 million and RM71.6 million respectively. SPRINT's debt service cover ratio (DSCR) for the year was lower than expected at 1.94 times due to compensation receivables. Nevertheless, it is higher than its covenanted DSCR of 1.50 times.
The stable outlook reflects MARC's expectations that SPRINT should be able to meet its debt obligations in the context of moderate delays in payment of government compensation. Should the compensation receivables collection period increase, SPRINT would have to rely on its available cash and bank balances and final issuance of loan stocks of RM25 million to meet any liquidity shortfalls.
Contacts: David Lee, +603-2082 2255/ firstname.lastname@example.org; Jason Kok, +603-2082 2258/ email@example.com; Ng Chun Kean, +603-2082 2230/ firstname.lastname@example.org.
February 26 , 2013
Tuesday, February 26, 2013
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