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Monday, 4 January 2016

RAM Ratings reaffirms AAA(fg) rating of Mydin’s Sukuk

Excluding the financial guarantee, Mydin Holdings’ stand-alone credit profile reflects its weak financial profile and the loss-making positions of its KR1MSAM’s Groceria and mall segments. The Group is also exposed to execution and construction risks in relation to its aggressive expansion, and the competitive environment of the local mass grocery retail sector.
On the other hand, Mydin Holdings credit profile is supported by its position as one of the largest locally owned grocery retailers, and as the only prominent player across all retail formats (i.e. hypermarket, emporium, mini-market). The Group has built an extensive presence, mainly in Peninsular Malaysia, with 272 outlets as at end-October 2015. The Group has also established a strong following among its targeted low-to-middle-income customers and carved a niche among Muslim consumers, by offering fully halal products and an array of goods manufactured by local players not typically carried by its foreign-owned competitors.
Notably, Mydin Holdings’ pre-tax profit doubled to MYR 29.37 million for FY Mar 2015 after a weak showing in the previous year (FY Mar 2014: MYR 14.40 million), driven by the better showing of its emporiums, mini markets and KR1M. The improvement of its mini-market and emporium segments were due the closure of unprofitable outlets, reduction in operating expenses following cost cutting efforts as well as better stock replenishment after rectifying its logistics and warehousing issues. Meanwhile, losses from KR1M narrowed, supported by subsidies. However, we note that the Group’s new mall and its venture into the premium-retail segment (via SAM’s Groceria) recorded increased losses in FY Mar 2015 amid poor performance of its new outlets.
In line with its expansion plans, Mydin Holdings’ borrowings had increased year-on-year from MYR 566.97 million to MYR 729.15 million as at end-FY Mar 2015. Correspondingly, its gearing ratio weakened to 1.47 times from 1.16 times. Including its operating lease commitments, Mydin Holdings’ adjusted gearing ratio stood at 2.60 times as at end-March 2015.
Looking ahead, Mydin Holdings remained focus on expanding in the hypermarket segment. “Factoring the required borrowings to fund its expansion, Mydin Holdings’ adjusted gearing is expected to stay elevated at about 2.5-2.8 times over the next few years,” says Kevin Lim, RAM’s Head of Consumer and Industrial Ratings. We remain concerned on the associated long gestation period for its new hypermarkets and the potential negative impact on its financial profile. “Mydin Holdings’ funds from operations debt cover is envisaged to stay depressed at around 0.1 times due to additional debt to fund expansion,” adds Lim.
(C P I Financial / 03 January 2016)
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WGC draft on gold standard for Islamic finance

The World Gold Council is exploring the creation of a Shariah Standard on Gold, which will provide guidance from the Shariah perspective on the usage of gold in financial and investment transactions for Islamic financial institutions and participants.

The Standard also aims to increase transparency and harmonisation regarding the use of gold in various market practices. A draft of the Standard has been prepared for the Council by Amanie Advisors, a DIFC-based consultancy and training agency specializing in Islamic finance.

As the Islamic financial services market grows in size and importance, so does the need for a greater understanding of the intricate matters of Islamic financial services and the application of Shariah guidance. The Islamic financial services industry is also witnessing greater implementation of internationally recognised and standardised Islamic finnce guidance.

The World Gold Council is calling for interested parties active in Islamic financial services to submit their responses to the development of a Shariah Standard on Gold. The council says that it is vital for organisations active in Islamic financial services to play a role in the development of the Standard.

The council wants to create a Standard that meets the requirements of all active participants in the market. The Standard will enable organisations to work more efficiently in creating Shariah compliant gold products, it will enhance access to gold in the Islamic world and it will help to address the liquidity management issues currently facing the industry.

The deadline for feedback has been extended to 31st January 2016 due to requests for more time from industry participants. An Arabic version of the Standard will be available shortly, the council said on its website.

(Menafn.Com / 03 January 2016)
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