RAM Ratings Reaffirms AAA(FG) Rating of Mydin's Sukuk

Transcription

1. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications RAM​ ​Ratings​ ​Reaffirms​ ​AAA(FG)​ ​Rating​ ​of Mydin's​ ​Sukuk 29​ ​December​ ​2017 RAM​ ​Ratings​ ​has​ ​reaffirmed​ ​the​ ​enhanced​ ​AAA(fg)/Stable​ ​rating​ ​of​ ​Mydin​ ​Mohamed​ ​Holdings Berhad's​ ​(Mydin​ ​Holdings​ ​or​ ​the​ ​Group)​ ​RM350​ ​million​ ​Danajamin-Guaranteed​ ​Islamic Medium-Term​ ​Notes​ ​Programme​ ​(2011/2024).​ ​The​ ​rating​ ​reflects​ ​the​ ​irrevocable​ ​and unconditional​ ​financial​ ​guarantee​ ​extended​ ​by​ ​Danajamin​ ​Nasional​ ​Berhad​ ​(rated AAA/Stable/P1),​ ​which​ ​enhances​ ​the​ ​credit​ ​profile​ ​of​ ​the​ ​IMTN​ ​beyond​ ​the​ ​Group's​ ​stand-alone credit​ ​strength. Excluding​ ​the​ ​guarantee,​ ​Mydin​ ​Holdings'​ ​stand-alone​ ​credit​ ​profile​ ​continues​ ​to​ ​be​ ​supported by​ ​its​ ​position​ ​as​ ​one​ ​of​ ​the​ ​largest​ ​locally​ ​owned​ ​grocery​ ​retailers.​ ​Despite​ ​disposing​ ​of​ ​mini markets​ ​(in​ ​April​ ​2017)​ ​and​ ​discontinuing​ ​Kedai​ ​Rakyat​ ​1​ ​Malaysia​ ​(KR1M)​ ​stores​ ​(in​ ​October 2017),​ ​the​ ​Group​ ​still​ ​has​ ​an​ ​extensive​ ​domestic​ ​presence,​ ​with​ ​75​ ​outlets​ ​as​ ​at​ ​end-October 2017.​ ​The​ ​Group​ ​has​ ​also​ ​established​ ​a​ ​strong​ ​following​ ​among​ ​its​ ​targeted​ ​low​ ​to middle-income​ ​customers​ ​and​ ​carved​ ​a​ ​niche​ ​in​ ​the​ ​Muslim​ ​consumer​ ​segment​ ​by​ ​offering​ ​fully halal​ ​products​ ​and​ ​an​ ​array​ ​of​ ​goods​ ​manufactured​ ​by​ ​local​ ​players. On​ ​the​ ​other​ ​hand,​ ​Mydin​ ​Holdings'​ ​credit​ ​profile​ ​is​ ​moderated​ ​by​ ​weak​ ​risk​ ​management​ ​and internal​ ​controls​ ​that​ ​had​ ​resulted​ ​in​ ​difficulty​ ​in​ ​adopting​ ​appropriate​ ​pricing​ ​following​ ​the implementation​ ​of​ ​the​ ​GST​ ​and​ ​subsequently​ ​anti-profiteering​ ​measures​ ​by​ ​the​ ​Government. The​ ​Group​ ​had​ ​incurred​ ​substantial​ ​losses​ ​until​ ​the​ ​resolution​ ​of​ ​pricing​ ​issues​ ​by​ ​mid-FY​ ​Mar 2017.​ ​Operating​ ​losses​ ​before​ ​depreciation,​ ​interest​ ​and​ ​tax​ ​in​ ​FY​ ​Mar​ ​2016​ ​and​ ​FY​ ​Mar​ ​2017 totalled​ ​RM75.94​ ​million​ ​and​ ​RM5.85​ ​million,​ ​respectively.​ ​Since​ ​the​ ​resolution​ ​of​ ​the​ ​pricing issues,​ ​the​ ​Group's​ ​core​ ​hypermarkets​ ​and​ ​emporiums​ ​segments​ ​have​ ​shown​ ​improved earnings. Mydin​ ​Holdings​ ​remains​ ​exposed​ ​to​ ​intense​ ​competition​ ​within​ ​the​ ​local​ ​mass​ ​grocery​ ​retail sector.​ ​Coupled​ ​with​ ​the​ ​gestation​ ​of​ ​newer​ ​stores​ ​and​ ​a​ ​lack​ ​of​ ​expertise​ ​in​ ​managing​ ​some outlets,​ ​the​ ​Group's​ ​malls,​ ​convenience​ ​stores​ ​and​ ​premium​ ​outlets​ ​segments​ ​are​ ​likely​ ​to continue​ ​to​ ​demonstrate​ ​poor​ ​performances.​ ​Given​ ​that​ ​loss-making​ ​mini​ ​markets​ ​and​ ​KR1M stores​ ​no​ ​longer​ ​weigh​ ​on​ ​Mydin​ ​Holdings'​ ​performance,​ ​we​ ​envisage​ ​better​ ​earnings​ ​in​ ​FY​ ​Mar 2018.​ ​The​ ​sustainability​ ​of​ ​the​ ​Group's​ ​earnings​ ​will,​ ​nonetheless,​ ​depend​ ​on​ ​its​ ​ability​ ​to​ ​turn around​ ​or​ ​dispose​ ​of​ ​loss-making​ ​divisions.​ ​While​ ​the​ ​Group​ ​plans​ ​to​ ​dispose​ ​of​ ​its​ ​premium outlets,​ ​this​ ​may​ ​take​ ​time​ ​due​ ​to​ ​the​ ​current​ ​weak​ ​consumer​ ​sentiment.
2. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications While​ ​Mydin​ ​Holdings'​ ​operating​ ​performance​ ​improved​ ​in​ ​2H​ ​FY​ ​Mar​ ​2017,​ ​its​ ​financial​ ​metrics remain​ ​weak.​ ​Notwithstanding​ ​the​ ​expansion​ ​of​ ​the​ ​Group's​ ​equity​ ​base,​ ​an​ ​increase​ ​in​ ​total adjusted​ ​debts​ ​to​ ​RM2.07​ ​billion​ ​as​ ​at​ ​end-March​ ​2017​ ​(end-March​ ​2016:​ ​RM1.86​ ​billion)​ ​kept its​ ​adjusted​ ​gearing​ ​ratio​ ​at​ ​a​ ​very​ ​weak​ ​3.47​ ​times​ ​(end-March​ ​2016:​ ​4.67​ ​times).​ ​Adjusted funds​ ​from​ ​operations​ ​debt​ ​coverage​ ​rose​ ​to​ ​0.1​ ​times​ ​for​ ​FY​ ​Mar​ ​2017​ ​(FY​ ​Mar​ ​2016:​ ​0.06 times),​ ​mainly​ ​on​ ​account​ ​of​ ​stronger​ ​cash​ ​generation.​ ​Mydin​ ​Holdings'​ ​liquidity​ ​stayed​ ​tight, given​ ​the​ ​Group's​ ​RM63.84​ ​million​ ​of​ ​cash​ ​and​ ​bank​ ​balances​ ​and​ ​RM135​ ​million​ ​of​ ​unutilised banking​ ​facilities​ ​against​ ​about​ ​RM490​ ​million​ ​of​ ​short-term​ ​debts​ ​as​ ​at​ ​end-June​ ​2017. Elsewhere,​ ​the​ ​Group's​ ​financial​ ​flexibility​ ​is​ ​limited​ ​in​ ​view​ ​of​ ​its​ ​highly​ ​leveraged​ ​position.​ ​Over the​ ​next​ ​3​ ​years,​ ​adjusted​ ​gearing​ ​and​ ​cashflow​ ​debt​ ​coverage​ ​are​ ​not​ ​anticipated​ ​to​ ​improve significantly​ ​as​ ​we​ ​foresee​ ​total​ ​adjusted​ ​debts​ ​to​ ​remain​ ​elevated. Organisation​ ​Name: News​ ​Type: RAM​ ​Rating​ ​Services​ ​Berhad RATING​ ​ANNOUNCEMENT Source: BNM​ ​Announcements Media​ ​Contact Padthma​ ​Subbiah (603)​ ​7628​ ​1162 padthma@ram.com.my Disclaimer: The​ ​credit​ ​rating​ ​is​ ​not​ ​a​ ​recommendation​ ​to​ ​purchase,​ ​sell​ ​or​ ​hold​ ​a security,​ ​inasmuch​ ​as​ ​it​ ​does​ ​not​ ​comment​ ​on​ ​the​ ​security's​ ​market price​ ​or​ ​its​ ​suitability​ ​for​ ​a​ ​particular​ ​investor,​ ​nor​ ​does​ ​it​ ​involve​ ​any audit​ ​by​ ​RAM​ ​Ratings.​ ​The​ ​credit​ ​rating​ ​also​ ​does​ ​not​ ​reflect​ ​the legality​ ​and​ ​enforceability​ ​of​ ​financial​ ​obligations. RAM​ ​Ratings​ ​receives​ ​compensation​ ​for​ ​its​ ​rating​ ​services,​ ​normally paid​ ​by​ ​the​ ​issuers​ ​of​ ​such​ ​securities​ ​or​ ​the​ ​rated​ ​entity,​ ​and sometimes​ ​third​ ​parties​ ​participating​ ​in​ ​marketing​ ​the​ ​securities, insurers,​ ​guarantors,​ ​other​ ​obligors,​ ​underwriters,​ ​etc.​ ​The​ ​receipt​ ​of this​ ​compensation​ ​has​ ​no​ ​influence​ ​on​ ​RAM​ ​Ratings'​ ​credit​ ​opinions or​ ​other​ ​analytical​ ​processes.​ ​In​ ​all​ ​instances,​ ​RAM​ ​Ratings​ ​is committed​ ​to​ ​preserving​ ​the​ ​objectivity,​ ​integrity​ ​and​ ​independence​ ​of its​ ​ratings.​ ​Rating​ ​fees​ ​are​ ​communicated​ ​to​ ​clients​ ​prior​ ​to​ ​the issuance​ ​of​ ​rating​ ​opinions.​ ​While​ ​RAM​ ​Ratings​ ​reserves​ ​the​ ​right​ ​to disseminate​ ​the​ ​ratings,​ ​it​ ​receives​ ​no​ ​payment​ ​for​ ​doing​ ​so,​ ​except for​ ​subscriptions​ ​to​ ​its​ ​publications. Similarly,​ ​the​ ​disclaimers​ ​above​ ​also​ ​apply​ ​to​ ​RAM​ ​Ratings' credit-related​ ​analysis​ ​and​ ​commentaries,​ ​where​ ​relevant.