George Kent’s Proposed Sukuk Wakalah Programmes Receive Final Rating from MARC

28/02/2021

Malaysian Rating Corporation Berhad (MARC) has assigned final ratings of MARC-1IS and A+IS to George Kent (Malaysia) Berhad's (George Kent) proposed Islamic Commercial Papers (ICP) Programme worth MYR 100 million and Islamic Medium-Term Notes (IMTN) Programme worth MYR 500 million (Sukuk Wakalah Programmes), subject to a combined limit of MYR 500 million. The ratings outlook is Stable. 

On the 13th of January 2021, MARC assigned preliminary ratings to the Sukuk Wakalah Programmes, with MARC affirming the same for the final rating. This is following a final review of the documentation pertaining to the Sukuk Wakalah Programmes, with MARC satisfied that there have been no material changes to the terms and conditions on which the preliminary ratings were based.  

Ratings Rationale 

MARC’s final ratings reflect George Kent’s robust liquidity, conservative capital structure, and stable water meter manufacturing business that is supported by brand recognition, a strong relationship network, and a vast geographical footprint. The rating is constrained by the volatility faced by the engineering business to construction contract flows, as well as cost of raw materials that could impact George Kent’s operating margin. 

Details 

George Kent produces over two million water meters per year, and its water meter sales have grown at a six-year compound annual growth rate of 4.2%, which provides a stable revenue base.  

The company’s performance for the first nine months of financial year 2021 (9M FY2021) was impacted by the pandemic, which resulted in the closure of its manufacturing plant for approximately one month. The plant is now fully operational.    

George Kent has maintained a total debt-to-equity ratio of 0.15x over the last five years, with a net cash position of MYR 123.7 million and a total debt of MYR 75.0 million against cash and equivalents of MYR 198.8 million as of October 2020.  

On the assumption of a full drawdown of MYR 500 million under the rated ICP and IMTN programmes, gearing could increase to around 1.0x and net gearing to around 0.6x. 

Although the rating keeps provision for borrowings to increase given the company’s growth strategy, MARC assumes no significant difference from the projected gearing level, and that debt-funded acquisitions will add value.  


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