The ratings reflect the unconditional and irrevocable guarantee extended by a consortium of three financial institutions, namely Mizuho Corporate Bank Ltd (Labuan), Sumitomo Mitsui Banking Corporation (Labuan) and The Bank of Tokyo-Mitsubishi Ltd (Labuan).
The backing of the bank guarantee enhances the credit-risk profile of the CP/MTN beyond MSG's inherent or stand-alone credit risk.
In the meantime, MSG’s credit profile remains underpinned by its position as the sole producer of float glass in Malaysia.
Given this, the Group’s performance depends on the local construction and automotive industries, which consume most of the glass it produces.
In the first nine months of financial year ending March 31, 2007 (FY Mar 2007), these sectors accounted for a respective 55% and 31% of MSG’s revenue base.
Although MSG is the only float-glass producer in Malaysia, it is still exposed to risks that affect demand for glass in general.
For instance, the local glass market has always faced the problem of illegal imports in the construction sector.
As for the automotive industry, the repercussions stemming from the announcement of the National Automotive Policy (in March 2006) have depressed the sales volumes of new vehicles.
Notwithstanding the above, MSG’s turnover has shown an increasing trend, from RM253.92 million in FY Dec 2004 to RM316.71 million in FY Dec 2005 and RM269.25 million for the first nine months of FY Mar 2007.
Nonetheless, the Group’s margins have been shrinking, primarily due to more expensive raw materials and higher energy costs.
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