RAM Ratings Assigns AA2/Stable/P1 ratings to APM Automotive's Proposed Sukuk
RAM Ratings Assigns AA2/Stable/P1 ratings to APM Automotive's Proposed Sukuk
Islam, Mal, Commenda, Reserves
Islam, Mal, Commenda, Reserves
Transcription
- 10 /28/2016 Latest Announcement - (News ID : 2016102800015) Latest Announcement News ID : 2016102800015 Subject : APM Automotive Holdings Berhad APM Automotive Holdings Berhad Organisation Name: RAM RATING SERVICES BERHAD News Type: RATING ANNOUNCEMENT Reference Site: None Embargo Date: 28/10/2016 Embargo Time: 11:40 AM Expiry Date: 27/11/2016 Priority: Medium Summary: RAM Ratings assigns AA2/Stable/P1 ratings to APM Automotive's proposed sukuk Attachments: No attachment available. Disclaimer: The user, including a user who is also a FAST Participant, expressly agrees that the use of this website which is accessible at https://fast.bnm.gov.my/ is at the user's sole risk. The information contained in this FAST website is compiled by MyClear Sdn. Bhd. (MyClear) and is provided on an "as is" basis without any representations or warranties of any kind, either expressed or implied. While MyClear makes every effort to ensure that information contained in the FAST website are accurate and disseminated in a timely and efficient manner, the user acknowledges that delays, errors, omissions or inaccuracies may occur. MyClear disclaims any liability pertaining to the consequences of any delays, errors, omissions or inaccuracies arising out of or relating to the FAST website or information, including but not limited to, any decision made or action taken by a user in reliance upon such information, or for damages suffered, whether direct, consequential, special, punitive, indirect or otherwise, notwithstanding having been advised of the possibility of such damages. In the event of any dispute, the official records of MyClear shall prevail. MyClear, Bank Negara Malaysia or any of its affiliates, officers, directors, agents or any other party involved in creating, producing or delivering the FAST website, shall not be liable for any direct, consequential, special, punitive, indirect, incidental or other damages arising out of or in any way connected with the use or inability to use the FAST website or information, whether based on contract, tort, liability or otherwise, even if advised on the possibility of any such damages. Content https://fast.bnm.gov.my/fastweb/public/PublicInfoServlet.do?chkBox=2016102800015&mode=DISPLAY&info=NEWS&screenId=PB010400 1/2
- 10 /28/2016 Latest Announcement - (News ID : 2016102800015) RAM Ratings has assigned an AA2/Stable rating to APM Automotive Holdings Berhad's (the Group) proposed RM1.5 billion Islamic MTN Programme (2016/2036), and a P1 rating to the Group's proposed RM1.5 billion Islamic CP Programme (2016/2023); the 2 programmes are subject to a combined limit of RM1.5 billion. ''APM's credit profile is supported by its position as one of the leading automotiveparts manufacturers in Malaysia. Underpinned by its 40year track record, most of the Group's products rank among the top 3 in terms of parts supplied to domestic car makers,'' highlights Kevin Lim, RAM's Head of Consumer and Industrial Ratings. APM also enjoys established relationships with domestic vehicle manufacturers. The Group's plant for Perodua seats boasts one of the largest local capacities, and operates in tandem with the marque's production schedule. These factors, combined with APM's technical expertise, represent significant entry barriers for certain products. The rating is also anchored on APM's solid balance sheet and commendable liquidity position. The Group has historically maintained a very low debt level, which largely consists of shortterm trade financing. Fortified by its healthy cash reserves, APM has been in a netcash position for the last 5 years. Its low debt level, together with a robust cashflow generating ability, has led to sturdy funds from operations (FFO) debt coverage levels. ''Moving forward, APM plans to pursue M&A opportunities to expand its overseas operations. Depending on the level of investment, the Group's debt load is expected to increase over the next 3 years, although its balance sheet is anticipated to remain solid, with respective gearing and net gearing ratios of not more than 0.3 and 0.1 times. We also expect its FFO debt coverage to range between 0.3 to 0.5 times,'' Lim elaborates. We believe, however, that foreign operations may entail challenges that are new to the Group, including execution and integration risks, while a protracted gestation period may affect its financial profile. Nonetheless, we derive some comfort from the management's cautious and measured approach. Meanwhile, APM faces significant concentration risk as sales to Perodua which accounts for some 35% of the domestic automotive market's total industry volume (TIV) have accounted for 35%40% of its top line in the last 5 years. However, the risk of business loss is largely mitigated by the integration of the Group's operations with Perodua's, and APM's established track record. Amid the keenly competitive business landscape, automotive and autoparts manufacturers are likely to experience increasing margin compression. APM's operating margins had declined in the last 34 years due to pricing pressure from auto manufacturers and rising input costs, while unfavourable forex movements had also adversely affected its margins in the last 12 years. The industry is expected to remain intensely competitive amid the slow growth of a maturing industry, new and competitively priced models, and subdued consumer sentiment. Demand for automotive parts is highly correlated to the performance of the local automotive industry, which generally tracks economic boombust cycles. Consumers normally defer vehicle purchases amid economic uncertainties, as observed this year. The TIV for 9M 2016 shrank 14% yoy due to weak sentiment and tight financing conditions. Moreover, policy changes in this highly regulated industry will directly affect industry players and influence consumers' buying behavior. APM began its operations about 45 years ago and currently manufactures a wide range of automotive components covering suspension parts, seats, interior and exterior plastics, heatexchange and electrical components. The Group was formed in 1999, following the demerger exercise of Tan Chong Motor Holdings Berhad, and was listed on the Main Market of Bursa Malaysia on 15 December that year. APM has operations in Malaysia, Australia, Indonesia, Vietnam and the Netherlands. Analytical contact Media contact Ben Inn Padthma Subbiah (603) 7628 1024 (603) 7628 1162 ben@ram.com.my padthma@ram.com.my 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' creditrelated analyses and commentaries, where relevant. Published by RAM Rating Services Berhad © Copyright 2016 by RAM Rating Services Berhad https://fast.bnm.gov.my/fastweb/public/PublicInfoServlet.do?chkBox=2016102800015&mode=DISPLAY&info=NEWS&screenId=PB010400 2/2
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