Naim sees 'good performance' to continue despite RAM negative debt rating

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KUALA LUMPUR (Dec 26): In its bid to quash the negative outlook on its RM500 million Islamic medium term notes by RAM Rating Services Sdn Bhd, Naim Holdings Bhd said the group's "good financial performance" in 2012 is expected to continue into next year due to more construction contracts and property launches.

In a response emailed to the media, Naim's senior director of corporate services Ricky Kho said the group is enjoying strong results from its property development division, as well as improving margins on its construction side.

"As at 3Q 2012, our group's PBT (profit before tax) stood at RM90.3 million, which was one of the highest in our history and an increase of 76.9% over the same period in 2011. We are on track to exceed our targeted profits this year," he said.

On Monday, RAM Ratings said it has maintained a negative outlook on the long-term rating of Naim's IMTN programme, as the group's current businesses, largely in Sarawak, expose it to geographical concentration risk, and it remains a relatively smaller player among its similarly rated peers.

The rating agency however reaffirmed the P1 rating on Naim's RM100 million Islamic commercial papers maturing in 2017. Its RM500 million IMTN maturing 2025 is rated AA3.

RAM Ratings said while the company's recovery is expected to gain momentum, its metrics for the FY2012, particularly its fund from operations (FFO) debt coverage, are expected to remain weak at below 0.2 times.

Naim's property development business, said Kho, is on track in terms of future property launches in key locations in FY2013 and FY2014, which will include large scale and up market mixed developments such as the Bintulu City Centre project.

"Take-up rates for our properties have been very good and above that of major property players. Our sales value to date was RM320 million for 770 units, the highest in our history and which was 60% above the entire FY2011, indicating a much improved performance," said Kho.

On the construction side, Kho said the current outlook for the construction industry in Malaysia and particularly Sarawak remains positive, substantially due to government spending on infrastructure and the development of Sarawak Corridor of Renewable Energy (Score).

In addition, Naim has also ventured into the Peninsular Malaysia's construction industry with the group securing two MRT packages awarded by Mass Rapid Transit Corporation Sdn Bhd recently.

In July, MRT Corp awarded Naim the contract worth RM208 million  to construct elevated stations and associated works between Section 16 in Petaling Jaya, Pusat Bandar Damansara and Jalan Semantan.

The group was also awarded the contract to construct elevated stations and associated works between Taman Industri Sungai Buloh, PJU 5 and Dataran Sunway worth RM204.7 million in October.

"We are also bidding for projects such as those for Score and we are hopeful of securing them based on our track record as a contractor. As such, our new order book replenishment should see new highs as compared with previous years," said Kho.

He said in FY2012, the group has secured a total of RM700 million worth of construction contracts, which brings its outstanding order book to around RM1.1 billion as at Sept 30, 2012.

Naim also plans to venture into large scale mixed developments, and to fund the expansion of its investment portfolio and land acquisitions via means other than borrowings.

"Everyone knows that business expansions require funding. However, not all funding will be by borrowings. Some of the financing measures we are exploring include joint ventures, equity, etc.

"As for capital expenditure on land acquisitions, taking into consideration Naim's track record of prudent cash flow and balance sheet management, these acquisitions will be properly managed.

"We have always been and will continue to be careful in managing our stakeholders money," explained Kho.

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