KUALA LUMPUR: TALIWORKS CORPORATION BHD []'s management has applied to the Securities Commission (SC) to extend the issuance deadline for its two units' proposed bonds totalling RM485 million following the uncertainty about the outlook for the Selangor water sector, according to RAM Rating Services Bhd.
The ratings agency said Taliworks' special purpose vehicle Destinasi Teguh Sdn Bhd had earlier proposed to issue RM395 million secured bonds while another unit, Sungai Harmoni Sdn Bhd, had planned to issue RM90 million redeemable loan stocks. The deadline for both proposed issuances was on May 28.
Pending the SC's approval and finalisation of the terms and conditions of the proposed debt facilities, RAM Ratings said "their preliminary ratings have also been placed on Rating Watch with a negative outlook".
Sungai Harmoni is an operations and maintenance provider for Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash).
Splash is the operator of phases 1 and 3 of the Sungai Selangor water-treatment plants and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), which is Selangor's sole water utility company, is the sole off-taker for its treated water.
"Pending the SC's approval and the finalisation of the terms and conditions of the proposed debt facilities, their preliminary ratings have also been placed on Rating Watch with a negative outlook, given the tightening liquidity and weakened cashflow of Sungai Harmoni in the immediate term," RAM Ratings sais in a statement on Thursday, June 10.
Destinai Teguh and Sungai Harmoni's proposed bonds are rated AA2, RatingWatch, negative outlook.
"All said, as long as the restructuring of the Selangor water sector remains unsettled, the water companies will remain vulnerable to Syabas' slow and partial payments. Any progress within the next few months will be crucial towards resolving the Rating Watch," RAM Ratings said.
RAM Ratings came to understand Splash had only been receiving 45% of its monthly billings to Syabas in recent months, which was a deterioration from the previous 60% collection rate.
This saw Splash's trade receivables surging to RM470.6 million as at end-March 2010 from RM276.88 million at end-March 2009. The ratings agency also warned that if collections from Syabas did not show significant improvement, "we expect Splash's liquidity position to be severely threatened".
RAM Ratings also cautioned that Splash would not be able to fund its requisite finance service reserve account balances by January 2011, which would be a breach of the covenants under its Bai Bithaman Ajil Debt Securities Issuance Facility (BaIDS) (2000/2016).
It added that due to Splash's financial woes, Sungai Harmoni was also affected and it had been receiving only partial payments from Splash.
"This has in turn weakened Taliworks' overall cash-generating ability, as Sungai Harmoni is its key cashflow contributor. This, coupled with the proposed financing exercise by Destinasi Teguh that is expected to weaken the credit profile of Taliworks' convertible bonds, will further strain the group's financial standing," it said.
RAM Ratings said Taliworks' RM201.95 million of consolidated cash and marketable securities as at end-March 2010 would support its short-term liquidity needs.
For the first quarter ended March 31, 2010, Taliworks posted net profit of RM19.41 million, up 130% from RM8.42 million a year earlier due to derivatives gain. However, pre-tax profit was RM11.1 million, below the RM11.29 million a year earlier. Revenue rose 20.7% to RM44.37 million from RM36.75 million.
Taliworks, which closed six sen higher at RM1.67 last Friday, is trading at a price-to-earnings ratio of 12.56 times.
OSK Research had in a recent report said excluding the one-off derivative gains incurred in 1Q01, Taliworks' earnings came in below its estimates by 24% and consensus by 23%.
The research house noted that although earnings at the water division were stronger due to higher production volume, the losses incurred by its waste management division and unrealised foreign exchange losses more than offset the water division's gains.
Taliworks rose six sen to RM1.67 last Friday, with 68,200 shares done.
The ratings agency said Taliworks' special purpose vehicle Destinasi Teguh Sdn Bhd had earlier proposed to issue RM395 million secured bonds while another unit, Sungai Harmoni Sdn Bhd, had planned to issue RM90 million redeemable loan stocks. The deadline for both proposed issuances was on May 28.
Pending the SC's approval and finalisation of the terms and conditions of the proposed debt facilities, RAM Ratings said "their preliminary ratings have also been placed on Rating Watch with a negative outlook".
Sungai Harmoni is an operations and maintenance provider for Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash).
Splash is the operator of phases 1 and 3 of the Sungai Selangor water-treatment plants and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), which is Selangor's sole water utility company, is the sole off-taker for its treated water.
"Pending the SC's approval and the finalisation of the terms and conditions of the proposed debt facilities, their preliminary ratings have also been placed on Rating Watch with a negative outlook, given the tightening liquidity and weakened cashflow of Sungai Harmoni in the immediate term," RAM Ratings sais in a statement on Thursday, June 10.
Destinai Teguh and Sungai Harmoni's proposed bonds are rated AA2, RatingWatch, negative outlook.
"All said, as long as the restructuring of the Selangor water sector remains unsettled, the water companies will remain vulnerable to Syabas' slow and partial payments. Any progress within the next few months will be crucial towards resolving the Rating Watch," RAM Ratings said.
RAM Ratings came to understand Splash had only been receiving 45% of its monthly billings to Syabas in recent months, which was a deterioration from the previous 60% collection rate.
This saw Splash's trade receivables surging to RM470.6 million as at end-March 2010 from RM276.88 million at end-March 2009. The ratings agency also warned that if collections from Syabas did not show significant improvement, "we expect Splash's liquidity position to be severely threatened".
RAM Ratings also cautioned that Splash would not be able to fund its requisite finance service reserve account balances by January 2011, which would be a breach of the covenants under its Bai Bithaman Ajil Debt Securities Issuance Facility (BaIDS) (2000/2016).
It added that due to Splash's financial woes, Sungai Harmoni was also affected and it had been receiving only partial payments from Splash.
"This has in turn weakened Taliworks' overall cash-generating ability, as Sungai Harmoni is its key cashflow contributor. This, coupled with the proposed financing exercise by Destinasi Teguh that is expected to weaken the credit profile of Taliworks' convertible bonds, will further strain the group's financial standing," it said.
RAM Ratings said Taliworks' RM201.95 million of consolidated cash and marketable securities as at end-March 2010 would support its short-term liquidity needs.
For the first quarter ended March 31, 2010, Taliworks posted net profit of RM19.41 million, up 130% from RM8.42 million a year earlier due to derivatives gain. However, pre-tax profit was RM11.1 million, below the RM11.29 million a year earlier. Revenue rose 20.7% to RM44.37 million from RM36.75 million.
Taliworks, which closed six sen higher at RM1.67 last Friday, is trading at a price-to-earnings ratio of 12.56 times.
OSK Research had in a recent report said excluding the one-off derivative gains incurred in 1Q01, Taliworks' earnings came in below its estimates by 24% and consensus by 23%.
The research house noted that although earnings at the water division were stronger due to higher production volume, the losses incurred by its waste management division and unrealised foreign exchange losses more than offset the water division's gains.
Taliworks rose six sen to RM1.67 last Friday, with 68,200 shares done.
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