EPICENTRE - Shariah Compliance in All Matters. Inspiring Confidence in Islamic Finance.

	February 2014 / Rabiulakhir 1435H
Malaysia's regulators and the Malaysian financial industry have worked continuously and collaboratively for over 30 years to develop policies, guidelines and frameworks with an emphasis on robust shariah compliance in every facet of the world's fastest growing financial industry.
Other Highlights:
An Interview with Monem Salam, ASEAN Equity Fund Portfolio Manager and President of Saturna Sdn. Bhd. Saturna Sdn. Bhd., a wholly-owned subsidiary of US-based Saturna Capital Corporation, recently launched the ASEAN Equity Fund ("Fund"), a Malaysian fund focused on public equities of Shariah-compliant companies in the ASEAN-5 (Malaysia, Indonesia, Singapore, Thailand and the Philippines). Epicentre speaks with Monem Salam, ASEAN Equity Fund portfolio manager and president of Saturna Sdn. Bhd. on the Fund and his plans for Saturna in Malaysia's Islamic finance marketplace. TO GET THE FULL INTERVIEW, CLICK HERE i-VCAP Management Launches MyETF MSCI Malaysia Islamic Dividend The prospectus launch was held today with a tentative listing on Bursa Securities' Main Market scheduled for March 21, 2014. MyETF-MMID is an open-ended fund with an approved fund size of 500 million units. Investors can subscribe to the Fund (subscription period up to March 12, 2014) at RM1.00 per unit with a minimum subscription size of 1,000 units. READ THE PRESS RELEASE HERE Collaborative Arrangement between Bursa Malaysia and Saudi Stock Exchange (Tadawul) Bursa Malaysia and the Saudi Stock Exchange (Tadawul) recently entered into a Memorandum of Understanding (MoU) to formalise collaboration to develop cross border activities between both exchanges in capital market development. READ THE PRESS RELEASE HERE World's Leading Capital Market Regulators Meet in Kuala Lumpur Key capital market regulators from developed and emerging market economies met in Kuala Lumpur for the Board Meeting of the International Organization of Securities Commissions (IOSCO). IOSCO is the leading global standard setter for securities regulation. Over 100 representatives of IOSCO from 30 jurisdictions around the world are in Malaysia during 19-21 February for the IOSCO Board Meeting, to discuss global issues affecting capital markets. READ THE PRESS RELEASE HERE
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AEON Credit fully redeems RM400 million debt programme

Published on 27 February 2014

RAM Ratings has received confirmation that AEON Credit Service (M) Berhad (or the Company) fully redeemed and terminated its RM400 million CP/MTN Programme (2007/2014) on 31 January 2014. Consequently, RAM no longer has any rating obligation in respect of the facility, which had previously carried AAA(bg)/Stable/P1 ratings.

Media contact

Gladys Chua

(603) 7628 1049

gladys@ram.com.my

RAM Ratings reaffirms A3 rating of Royal Selangor’s RM30 million bonds

Published on 26 February 2014

RAM Ratings has reaffirmed the A3/Stable rating of Royal Selangor International Sdn Bhd’s (Royal Selangor or the Group) RM30 million Redeemable Unsecured Bonds (2001/2014). Royal Selangor and its subsidiaries are mainly involved in the manufacture and marketing of pewter products as well as the marketing of jewellery under the brand Selberan.

The rating is supported by Royal Selangor’s strong brand equity and quality product offerings. With over 129 years of involvement in the pewterware business, the Group has picked up numerous industry awards in recognition of its product designs and quality. Royal Selangor’s balance sheet is manageable while its debt coverage remains adequate.

Although the Group assumed more debt to fund working capital and capex for 4 new outlets in FY June 2013, augmented shareholders equity from better profitability moderated its gearing ratio to 0.76 times as at end-June 2013 (end-June 2012: 0.81 times). Its funds from operations debt cover (FFODC) also improved to 0.22 times (FY June 2012: 0.15 times) on account of a better operating performance. That said, increased working capital needs kept the Group’s operating cashflow debt cover (OCFDC) thin at 0.05 times (FY June 2012: 0.03 times). “Taking into consideration additional debt for capex and operational needs, the Group’s gearing ratio is envisaged to hover at around 0.8 times in the medium term, while the sustained operating performance of its existing outlets are expected to keep its FFODC at about 0.2 times,” said Kevin Lim, RAM’s Head of Consumer and Industrial Ratings. 

The rating remains moderated by Royal Selangor’s susceptibility to volatile tin prices and heightened working capital needs. Lengthy receivables and inventory cycles have led to its operating cash cycle averaging above 400 days over the past 5 fiscal years. Hefty working capital requirements weaken the Group’s liquidity profile. Elsewhere, the giftware and jewellery sectors are cyclical and vulnerable to economic changes and fast-changing consumer preferences. This, coupled with a competitive operating landscape, will continue to pose a challenge to the Group’s operations.

Media contact

Juliana Koay

(603) 7628 1169

juliana@ram.com.my

MARC AFFIRMS RATINGS ON SPRINT’S RM510 MILLION ISLAMIC SECURITIES AT A+ID AND RM365 MILLION BANK GUARANTEED BONDS AT AA-(bg)

Feb 26, 2014 -

MARC has affirmed its A+ID and AA-(bg) ratings on 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) respectively. The outlook on the ratings is stable. SPRINT is the toll concessionaire and operator of the 25.5-kilometre interlinked tolled roads comprising Damansara Link, Kerinchi Link and Penchala Link in the Klang Valley.

The rating of the BG bonds reflects the lowest financial institution rating of AA-/Stable from MARC on SPRINT’s three guarantor banks, namely Public Bank Berhad, AmInvestment Bank Berhad and RHB Bank Berhad, in line with MARC’s weakest link approach. MARC maintains non-solicited ratings on the three banks on the basis of information in the public domain. Any changes to the rating and outlook of the BG bonds would be predominantly driven by changes in the credit strength of the guarantor banks.

The rating of the BaIDS is premised on SPRINT's standalone credit profile which is underpinned by the company’s sufficient operational cash flow on the back of satisfactory traffic performance against projections. Moderating the rating is the susceptibility of SPRINT’s liquidity position to cash flow mismatch arising from delays in toll compensation from the government following toll hike deferments.

The toll hike deferments on the Damansara Link and Kerinchi Link, the concessions of which will expire in 2034 and the Penchala Link the concession of which will expire in 2031 continue to support traffic growth. The overall traffic volume in the first ten months of 2013 (10M2013) improved to 65,403,749 vehicles (10M2012: 62,092,352 vehicles) against a projection of 65,386,448 vehicles. Of the three links, Penchala Link exhibited the strongest average daily traffic growth of 10.8% as it benefited from some shift in traffic from the Damansara Link due to ongoing Klang Valley Mass Rapid Transit (KVMRT) Sungai Buloh–Kajang Line construction works. However, MARC highlights that Penchala Link continues to underperform against traffic projections by 4.7% in 10M2013 (2012: -5.1%) which may exert negative pressure on SPRINT’s cash flow generation.

MARC observes that government compensation as a proportion of SPRINT’s total revenue in the financial year ended March 31, 2013 (FY2013) has increased to RM60.5 million, or 35.0% (FY2012: RM54.9 million, or 33.6%). While the government continues to honour the toll compensations, MARC views the timeliness of compensation as critical to SPRINT’s liquidity position to address the toll concessionaire’s financial obligations. Nevertheless, liquidity risk in the near term is somewhat mitigated by SPRINT’s cash and bank balances (including funds in the debt reserve account) of RM116.6 million and undertaking from the shareholders, Lingkaran Trans Kota Holdings Bhd, Gamuda Bhd and Kumpulan Perangsang Selangor Bhd, to subscribe to loan stocks of up to RM25 million.

For FY2013, SPRINT’s revenue and operating profit grew to RM173.1 million and RM109.5 million (FY2012: RM163.7 million and RM100.4 million) respectively. However, profitability continued to be dragged by the high financing cost of RM125.6 million in FY2013 (FY2012: RM123.4 million), particularly on government support loans which are accrued and deferrable, leading to pre-tax losses of RM12.3 million (FY2012: -RM18.9 million). The company’s accumulated losses widened further to RM426.3 million in FY2013 (FY2012: -RM412.9 million). SPRINT’s cash flow from operation (CFO) remained flat at RM138.0 million (FY2012: RM136.4 million), but is sufficient to cover its financial obligations on the BG bonds and BaIDS of RM87.1 million and RM32.1 million respectively in FY2013. SPRINT’s debt service coverage ratio (DSCR) was lower at 1.86 times (FY2012: 1.96 times) due to weaker cash balance. Notwithstanding this, the DSCR is still within the covenanted level of 1.50 times.

The stable outlook on the BaIDS reflects MARC’s expectations that SPRINT’s financial metrics will be consistent with its current rating, supported by sufficient cash flow generation in the context of moderate delays in government compensations. Downward rating pressure may emerge if traffic performance deviates significantly from projections and/or the liquidity position of SPRINT is weakened further due to prolonged toll hike deferments by the government.

Contacts:

Ng Chun Kean, +603-2082 2230/ chunkean@marc.com.my;

David Lee, +603-2082 2255/ david@marc.com.my.