MARC affirms its long-term rating of AAAis on Assar Chemicals Sukuk.
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Malaysian Rating Corporation (MARC) said it has affirmed its long-term rating on independent oil terminal (IOT IOT In Order To
IOT Index-Organized Table
IOT British Indian Ocean Territory (ISO 3-letter country code)
IOT Interoperability Testing
IOT Initial Operational Test
IOT In-Orbit Test ) owner, Assar Chemicals Sdn Bhd's (ACSB) MYR MYR
In currencies, this is the abbreviation for the Malaysian Ringgit.
The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 150 million ($41.7 million) Serial Sukuk Musharaka at AAAIS. The outlook on the rating is stable.
MARC said that the affirmed rating reflects the fundamentals of the underlying oil terminal project, underpinned by a 30-year agreement through 2037 with terminal users of superior credit standing. Contractual monthly tariffs which provide for cost recovery from Petronas Dagangan Berhad (PDB) and Shell Timur Sdn Bhd SDN BHD Sendirian Berhad (Malay equivalent to incorporated) (STSB STSB Secure Telephony System Bus
STSB Sit Tibi Semper Bene (Latin: Be Good to You All the Time, epigraphy) ) back ACSB's ability to meet its obligations under the Sukuk. The rating also incorporates ACSB's status as a linked entity of the Sarawak State.
"The stable outlook on the rating reflects MARC's expectation of continued satisfactory operation of the oil terminal as well as adequate revenue and cash flow generation vis-a-vis obligations under the Sukuk," the rating agency said.
Incorporated to undertake the construction and operation of the IOT in Senari in Kuching, Sarawak, ACSB entered into a Musharaka contract with the Sukuk holders for the purpose of constructing and leasing the IOT. The Sukuk trustee holds a beneficial interest in the IOT on behalf of the Sukuk holders.
The IOT is leased to ACSB pursuant to a lease agreement between the Sukuk trustee and ACSB. The lease rentals, funded by monthly tariffs from the terminal users are applied towards profit payments, and serial redemption Serial redemption
The redemption of a serial bond. of the Sukuk which commenced in August 2008. The IOT, which has been in operation since January 2007, is a centralised Adj. 1. centralised - drawn toward a center or brought under the control of a central authority; "centralized control of emergency relief efforts"; "centralized government"
centralized storage facility for bulk petroleum products and liquefied petroleum gas liquefied petroleum gas or LPG, mixture of gases, chiefly propane and butane, produced commercially from petroleum and stored under pressure to keep it in a liquid state. . ACSB's related company, IOT Management Sdn Bhd, in which PDB and STSB have a direct shareholding of 20 per cent and 10 per cent respectively, was appointed to manage, operate and maintain the oil terminal for a period of 30 years.
ACSB is a wholly-owned subsidiary of Assar Senari Sdn Bhd, which in turn is linked to the Sarawak government through a 20 per cent ownership by Yayasan Sarawak, a state-owned agency. Its ultimate holding company is Lembaga Amanah Kebajikan Masjid Negeri Sarawak, an organisation incorporated and governed by the Charitable Trust The arrangement by which real or Personal Property given by one person is held by another to be used for the benefit of a class of persons or the general public. Ordinance, which effectively holds a 56.5 per cent interest in ACSB.
For financial year ended December 2007 (FY2007), ACSB's revenue of MYR 26.5 million $7.3 million) was marginally higher than forecast as it was based on tariff revenue for 13 months, including January 2008, arising from advanced billing procedures in accordance with the agreement with its users. As a result, ACSB's pre-tax profit of MYR 8.8 million ($2.4 million) and operating profit margin Operating profit margin
The ratio of operating profit to net sales. of 68.3 per cent was also higher than earlier forecast.
Despite the Sukuk's large initial profit payment of MYR 18.5 million ($5.1 million accumulated since the Sukuk's issuance in August 2005) which was paid as scheduled, ACSB maintained some headroom in its compliance with its minimum required finance service cover ratio of 1.2 times, at 2.15 times for FY2007. ACSB is expected to be able to maintain its finance service coverage at comfortable levels underpinned by its strong earnings generation capacity.
Based on unaudited accounts for financial year ended December 31, 2008 (FY2008), ACSB achieved its revenue forecast of MYR 24.9 million ($6.9 million). Its profitability remained healthy with an operating profit margin of 63.3 per cent and pre-tax profit of MYR 7 million ($1.9 million). Collection of tariff payments from the users remained within the 30-day credit period. Meanwhile, its debt-to-equity ratio debt-to-equity ratio
The relationship between long-term funds provided by creditors and funds provided by owners. A firm's debt-to-equity ratio is calculated by dividing long-term debt by owners' equity. Both items are shown on the balance sheet. has declined to 2.8 times, below the covenanted limit of 4 times under the Sukuk, and is expected to continue to decline through stable retention of earnings coupled with scheduled redemption of the Sukuk.
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