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IOI Corporation Berhad
Malaysia
| Ratings |
Category
Outlook
Issuer
Rating
IOI Ventures (L) Berhad
Outlook
Bkd Sr Unsec
Bank Credit Facility
Bkd Senior Unsecured |
Moody's Rating
Negative
A3
Negative
A3
A3 |
| Contacts |
Analyst
Peter Choy/Hong Kong
Brian
Cahill/Sydney |
Phone
852.2916.1266
612.9270.8105 |
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| Key Indicators |
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| IOI Corporation Berhad |
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2003 |
2004 |
2005 |
2006 |
[1]2007 |
5-yr Average |
| FFO Interest coverage |
12.2 |
16.81 |
0.7 |
8.5 |
11.7 |
12.0 |
| FFO / Debt [2] |
44.6% |
50.0% |
34.7% |
41.0% |
42.2% |
42.5% |
| RCF / Net Debt [2] |
46.6% |
54.7% |
34.0% |
26.4% |
30.8% |
38.5% |
| EBITA / Interest |
10.9 |
17.1 |
10.8 |
9.2 |
13.1 |
12.2 |
| EBITA / Average Assets |
NA |
13.9% |
13.1% |
12.2% |
16.1% |
13.8% |
| Debt / EBITDA [2] |
2.0 |
1.6 |
2.3 |
1.8 |
1.7 |
1.9 |
| EBITDA / Interest |
12.6 |
19.4
| 12.2
| 10.3 |
14.5 |
13.8 |
| EBITA / Revenue |
21.8% |
23.0% |
21.0% |
21.0% |
21.7% |
21.7% |
[1] As of June 30 [2] Adjusted for operating lease and guarantees to third
parties
Note: For definitions of Moody's most common ratio terms please
see the accompanying User's Guide.
Company Profile
IOI Corporation Berhad ("IOI") was
incorporated in Malaysia in 1969 with the principal business of manufacturing
and distributing industrial gas and was listed on the Kuala Lumpur Stock
Exchange in July 1980. IOI started its palm oil business in 1983 adding
downstream olechemical business in 1997.
As of 30 June 2007 the size of IOI's oil palm estate plantations stood at
148,871 planted hectares out of titled land area of 169,450 hectares spread over
80 estates. Most of IOI's fresh fruit bunches ("FFB") are processed in its 12
palm oil mills which have a total annual capacity of 3.9 million tones of FFB.
Around 74% of IOI's plantation revenue is constituted of sales to its downstream
operations which have a total refining capacity of 3.2 million metric tonnes.
IOI has also diversified into property development which is principally
operated through a 71%-owned subsidiary, IOI Properties Berhad ("IOI
Properties"). A controlling interest in IOI Properties was acquired in 1994.
Rating Rationale
IOI's A3 rating reflects (i) continued
favourable outlook for palm oil demand; (ii) IOI's position as a global top tier
palm oil producer and its efficient operations; (iii) continued profit margin
improvements in its downstream business; (iv) IOI's solid balance sheet
liquidity as well as its strong access to capital and bank markets; and (v)
management's good track record in managing the palm oil business throughout the
cycle.
The rating also takes into consideration (i) commodity nature and cyclical
pricing for palm oil; (ii) the cyclicality of IOI's property business even
though it has contributed steady profits over the last 3 fiscal years; and (iii)
the company's continuing expansion through acquisitions. However, Moody's draws
comfort from the fact that such acquisitions are within its core business and
have been completed within its financial means.
The planned additional debt issuance will likely weaken IOI's financial
profile and the projected Debt/EBITDA of 3.0x - 2.7x and EBITDA/Interest of 9.0x
- 8.4x in the next 2 years weakly position the company at the current A3 rating
level.
IOI has stronger credit metrics when compared with the A3 real estate
investment trust companies, but it's downstream business is affected to some
extent by the commodity price of palm oil and hence it is relatively more
cyclical in its business. Comparing with other Malaysia peer Genting Berhad, IOI
has a weaker financial profile. However, Genting has a large expansionary plan
in its overseas gaming operations which involve execution risk, and Genting's
Baa1/Stable rating also factors in structural subordination.
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