Thursday September 20, 2012
RAM chooses 9 Malaysian companies among Asean’s top 20
PETALING JAYA: RAM Ratings has selected nine Malaysian companies among 20 Asean peers in ten different industries primarily based on their market capitalisation and revenue as the region’s leading companies. The local companies chosen were Axiata Group Bhd, DiGi.Com Bhd, Genting Bhd, IOI Corp Bhd, Kuala Lumpur Kepong Bhd, Maxis Bhd, Petronas Chemicals Group Bhd, Sime Darby Bhd and Tenaga Nasional Bhd.
In the research paper Leading Asean Corporates, the publication also discusses the prospects of the Asean debt capital market, in conjunction with its views on the Asian bond market.
RAM’s analysis indicates that the credit metrics of Asean’s leading corporates have stayed robust following the global financial crisis in 2008 and 2009.
Between 2008 and 2011, the revenue of the 20 featured companies charted a compounded annual growth rate of almost 13% while their mean margin on operating profit before interest and tax clocked in at close to 20%.
“We observe that seven of the 20 corporates recorded consistent year-on-year improvements in pre-tax profits over the same period.
“On top of that, most of them have conservative capital structures, complemented by robust cashflow-generating aptitudes. These favourable financials are underscored by their entrenched market positions,” said RAM.
It added that the revenues of these companies are underscored by their entrenched market positions. The majority of these leading Asean corporates are within the top echelons in their respective home countries, or have significant market shares.
“In some instances, they are also dominant regional or global players in their respective industries. Quite often, these entities can lay claim to established proprietary brands or sturdy track records that encourage recurring sales,” said RAM.
It added that many of these corporates are increasingly operating in more than one country, thus providing a buffer against adverse events in any particular market. Some have integrated operations within a certain value chain while others own diversified businesses.
“Their strength lies not merely in diversity, but the fact that they are typically successful in every line of business they are engaged in. Meanwhile, underlying market conditions and population demographics tend to support longer-term revenue growth prospects,” said RAM.
The corporates’ strong business profiles are further underlined by their relatively stable profit margins, which are generally above the various industry averages. Their mean operating profit before interest and tax (OPBIT) and pre-tax margins have clocked in at a respective 19.3% and 18.7% for the past 4 years.
“Notably, the OPBIT margins of telecommunication companies have regularly exceeded 30%. With moderate price competition and lean cost structures, their earnings are relatively resilient in the face of economic cyclicality. On this score, Maxis tops the group in terms of profit margins with an OPBIT margin of 36.6% in fiscal 2011,” sais RAM.
On the other hand, players in the aviation, chemicals and plantation sectors exhibit more volatile earnings.
RAM noted that most of the leading corporates have sizeable capital-expenditure programmes, to enable them to keep abreast of technological updates or changes in consumer preferences. Regardless of the circumstances, high investment costs would tend to elevate debt levels.
Meanwhile, a handful of companies enjoyed net-cash positions as at the end of their last full fiscal years. These include Singapore Airlines Limited, Petronas Chemicals, Digi.Com and Genting.