Friday, June 18, 2010

RAM Ratings reaffirms AA3/P1 ratings of Naim's Islamic securities

KUALA LUMPUR: RAM Ratings has reaffirmed the respective long- and short-term ratings of AA3 and P1 for NAIM HOLDINGS BHD []'s (Naim) RM500 million Islamic Medium-Term Notes Programme (2010/2025) and RM100 million Islamic Commercial Papers Programme (2010/2017) (collectively known as the Islamic Securities) with a stable outlook.

Naim is a property-development and CONSTRUCTION [] group based in Sarawak.

It holds a 36% stake in Dayang Enterprise Holdings Berhad, a listed provider of oil and gas support services.

The ratings reflect Naim's strong track record in securing numerous federal and state government-funded construction projects in Sarawak, said RAM Ratings in a statement Tuesday, June 15.

Naim also is anticipated to win more contracts this year as more jobs are expected under Budget 2010, the Sarawak Corridor of Renewable Energy and the Tenth Malaysia Plan, it said.

RAM Ratings' head of real estate and construction ratings Shahina Azura Halip said these initiatives, coupled with Naim's healthy outstanding order book of RM1.17 billion (as at end-March 2010), were expected to sustain the group's earnings over the next few years.

"Nonetheless, Naim's margins are expected to become narrower amid more competitive contract bidding," she said.

RAM Ratings said Naim was also one of the largest and more well-known property developers in Sarawak.

However, its unbilled sales dwindled from RM175 million as at end-August 2008 to RM79 million as at end-March 2010, due to fewer launches amid the subdued property market last year, it said.

Nonetheless, the group's low holding costs vis-''-vis over 2,400 acres of undeveloped land allow it the flexibility to defer launches according to market conditions, it said.

"Meanwhile, Naim's net gearing ratio stood at a healthy 0.02 times as at end-March 2010. Moving forward, the group is expected to progressively gear up to fund land acquisitions and working capital.

"All said, its gearing and funds from operations debt coverage ratios are still expected to remain healthy at around 0.5 times and 0.2-0.3 times, respectively," it said.

On the other hand, the rating agency said Naim's strengths were moderated by the uncertainties vis-''-vis its foreign ventures, particularly its maiden venture in Fiji, due to their unfamiliar operating and regulatory environments.

Since most of Naim's operations are based in Sarawak, however, this exposes the group to geographical-concentration risk, it said.

"As its property projects are mainly limited to Miri, any upside potential for its property division will be capped by the performance of Sarawak's property market.


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