KUALA LUMPUR (Nov 25): Malaysian Rating Corporation (MARC) has affirmed the short-term and upgraded the long-term ratings of BOON KOON GROUP BHD []’s RM100 million Islamic debt notes.
It said on Friday, the ratings were for the commercial papers/Islamic medium term notes (ICP/IMTN) which were upgraded to MARC-3 ID/BBB ID from MARC-3 ID /BBB- ID respectively.
“The rating outlook is stable. The rating action affects RM45 million of outstanding notes issued under the programme,” it said.
MARC said the upgrade in the long-term rating was based on the improvement in the group’s business and financial risk profile after restructuring efforts in 2009 and 2010 and improved business conditions in the domestic rebuilt commercial vehicle segment.
However, the ratings agency cautioned that the group’s high debt leverage and long cash conversion cycle continues to weigh on its financial risk.
Boon Koon Group’s short-term rating remains unchanged due to its sizeable upcoming debt maturities in 2012 and its modest free cash flow generation in the three months to June 30, 2011 (1QFY2012).
The group rebuilds commercial vehicles and bodyworks; trades in commercial vehicle accessories, parts and components; and resale of value-added chassis cabs and equipment
MARC said Book Koon Group -- as market leading player in the domestic rebuilt commercial vehicles segment -- has benefited from the consolidation of a fragmented industry to 18 players from players previously.
Since incurring substantial losses for the 15 months ended March 31, 2009, the group implemented a comprehensive restructuring of its business which involved shutting down loss-making entities, disposing non-core assets, and streamlining of operations.
The group has achieved a reduction in costs; profit before tax improved from a modest RM0.1 million in FY2010 to RM2.6 million in FY2011 on the back of a marginal 3.0% growth in revenues.
Consequently, operating profit margins recovered to 7.79% based on 1QFY2012 results, from 5.45% in FY2011. Cash flow from operations (CFO) for the year moderated to RM31.6 million (FY2010: RM41.5 million) as benefits from rationalisation efforts and lower taxes tapered off (net tax refund of RM4.2 million in FY2010 compared to net tax paid of RM0.7 million in FY2011).
Gearing as measured by the debt-to-equity (DE) ratio has come down to 2.22 times as at end 1QFY2012, compared to 3.08 times in FY2009.
MARC said the group has sufficient liquidity on hand to meet its upcoming bond repayment of RM10.0 million due in February 2012.
Its final note maturities of RM35.0 million in December 2012 would be exposed to some measure of refinancing risk particularly as cash generation appears to be slowing.
Recently, the group announced plans to sell a majority stake in its leasing business to Hitachi Capital Corporation for RM9.0 million, the proceeds of which would be mostly used to fund its repayment of the outstanding notes.
The stable rating outlook reflects MARC’s expectation that the group will continue to manage its liquidity and refinancing needs in a proactive manner.
It said on Friday, the ratings were for the commercial papers/Islamic medium term notes (ICP/IMTN) which were upgraded to MARC-3 ID/BBB ID from MARC-3 ID /BBB- ID respectively.
“The rating outlook is stable. The rating action affects RM45 million of outstanding notes issued under the programme,” it said.
MARC said the upgrade in the long-term rating was based on the improvement in the group’s business and financial risk profile after restructuring efforts in 2009 and 2010 and improved business conditions in the domestic rebuilt commercial vehicle segment.
However, the ratings agency cautioned that the group’s high debt leverage and long cash conversion cycle continues to weigh on its financial risk.
Boon Koon Group’s short-term rating remains unchanged due to its sizeable upcoming debt maturities in 2012 and its modest free cash flow generation in the three months to June 30, 2011 (1QFY2012).
The group rebuilds commercial vehicles and bodyworks; trades in commercial vehicle accessories, parts and components; and resale of value-added chassis cabs and equipment
MARC said Book Koon Group -- as market leading player in the domestic rebuilt commercial vehicles segment -- has benefited from the consolidation of a fragmented industry to 18 players from players previously.
Since incurring substantial losses for the 15 months ended March 31, 2009, the group implemented a comprehensive restructuring of its business which involved shutting down loss-making entities, disposing non-core assets, and streamlining of operations.
The group has achieved a reduction in costs; profit before tax improved from a modest RM0.1 million in FY2010 to RM2.6 million in FY2011 on the back of a marginal 3.0% growth in revenues.
Consequently, operating profit margins recovered to 7.79% based on 1QFY2012 results, from 5.45% in FY2011. Cash flow from operations (CFO) for the year moderated to RM31.6 million (FY2010: RM41.5 million) as benefits from rationalisation efforts and lower taxes tapered off (net tax refund of RM4.2 million in FY2010 compared to net tax paid of RM0.7 million in FY2011).
Gearing as measured by the debt-to-equity (DE) ratio has come down to 2.22 times as at end 1QFY2012, compared to 3.08 times in FY2009.
MARC said the group has sufficient liquidity on hand to meet its upcoming bond repayment of RM10.0 million due in February 2012.
Its final note maturities of RM35.0 million in December 2012 would be exposed to some measure of refinancing risk particularly as cash generation appears to be slowing.
Recently, the group announced plans to sell a majority stake in its leasing business to Hitachi Capital Corporation for RM9.0 million, the proceeds of which would be mostly used to fund its repayment of the outstanding notes.
The stable rating outlook reflects MARC’s expectation that the group will continue to manage its liquidity and refinancing needs in a proactive manner.
