Wednesday, June 9, 2010

RAM Ratings revises IRIS Tech's debt issues to stable

KUALA LUMPUR: RAM Ratings has revised the outlook on the long-term ratings of IRIS Technologies (M) Sdn Bhd's (IRIS Tech) RM60 million Bai' Bithaman Ajil Islamic Debt Securities (2003/2010) (BaIDS) and RM40 million Murabahah Commercial Papers/Medium-Term Notes Programme (2004/2011) (CP/MTN) from negative to stable.

The BaIDS and CP/MTN are currently rated A3 and A3/P2, respectively.

In a statement on Wednesday, June 9, RAM Ratings said the change in outlook was premised on the sustained improvement in financial profile of IRIS CORPORATION BHD [], the parent company IRIS Tech; referred to collectively as IRIS Corp or the Group.

The Group also has secured financing arrangements to prepay IRIS Tech's BaIDS and CP/MTN, thus alleviating previous concerns about its liquidity position, said the rating agency.

The ratings reflect the Group's established track record as the sole supplier of MyKads and e-passport substrates in Malaysia, it said.

"Meanwhile, the group has increased its geographical diversity, with overseas projects accounting for 52% of its turnover in FY December 2009 (FY December 2008: 47%).

"IRIS Corp recorded RM56.79 million in operating profit before depreciation interest and tax in FY December 2009 on the back of RM331.73 million turnover (FY December 2008: RM44.52 million and RM285.60 million, respectively)," it said.

In tandem with its improving profitability and cashflow generation, the Group's funds from operations debt cover inched up to 0.37 times in FY December 2009.

Elsewhere, with the repayment of IRIS Corp's BaIDS as well as other borrowings, the Group's gearing ratio ameliorated to 0.44 times as at end-March 2010.

Nonetheless, the ratings remain moderated by the Group's exposure to earnings and cashflow volatility due to the lumpiness of its project-based revenue, it said.

"Given that most of its contracts are with foreign governments, IRIS Corp is exposed to country risk, ie changes in government policies, economic conditions and political developments, especially in less developed countries.

"In other developments, the Group has signed several agreements with regard to its environment-solutions business; more detailed assessment of these projects will be conducted as greater clarity emerges," said RAM Ratings.

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