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Home / [The Edge] MARC affirms AAA-IS(bg) rating for Masteel’s RM130 mil sukuk programme
By Anis Hazim
KUALA LUMPUR (Nov 28): MARC Ratings Bhd has affirmed the AAA-IS(bg) rating on Malaysia Steel Works (KL) Bhd’s (Masteel) RM130 million Sukuk Ijarah programme that is guaranteed by Bank Pembangunan Malaysia Bhd, with stable outlook.
The steel manufacturer’s credit profile incorporates its longstanding track record in the domestic production of steel billets and steel bars, MARC said in a statement on Tuesday (Nov 28).
The credit profile was also due improving operational efficiency from investment in production technology, the rating agency said, although margins contracted recently amid higher input costs.
In the first half of 2023 (1H2023), Masteel’s revenue grew by 4.5% year-on-year (y-o-y) to RM934.3 million on higher sales volume, despite the price volatility for both material and product prices, which could pressure margins.
“The group manufactures and markets high-tensile steel bars and prime steel billets, with the domestic market continuing to constitute the bulk of revenue at about 96% in 2022 (2021: 91%),” MARC said.
Operating profit margin, nevertheless, contracted in 1H2023 to 1.8% (2022: 2.6%) on lower steel bar prices — down by 5.3% y-o-y to RM3,690 per metric ton (mt) on average — and higher input costs.
“Despite some easing in recent months, raw material costs remained elevated compared to historical levels, which could continue to weigh on margins,” it noted.
Meanwhile, the company’s total debt was largely unchanged at RM482.2 million as at end-June 2023 as compared to RM471.4 million in 2022, mainly composed of bill payables for working capital. Its gross debt-to-equity (DE) ratio stood at 0.56 times as at end-1H2023, and net DE ratios stood at 0.44 times.
“Masteel had RM100.5 million of cash as at end-June 2023, more than sufficient to meet its its upcoming RM50 million notes maturity under the rated programme on Nov 30, 2023,” MARC said.
Shares in Masteel closed unchanged at 33 sen on Tuesday, valuing the company at RM224.11 million.
