MIRA INFORM REPORT

Report No. :	346661
Report Date :	27.10.2015

IDENTIFICATION DETAILS

Name :	NIPPON EGALV STEEL SDN. BHD.
Formerly Known As :	E-GALV STEEL INDUSTRY SDN BHD (14/12/2009) TA ZHENG STEEL INDUSTRY SDN BHD (21/02/2007)
Registered Office :	45, Jalan Perak, 10150 Georgetown, Pulau Pinang
Country :	Malaysia
Financials (as on) :	31.12.2014
Date of Incorporation :	20.01.2006
Com. Reg. No.:	721702-W
Legal Form :	Private Limited
Line of Business :	Manufacturing of electro galvanised steel
No. of Employees :	80 [2015]

RATING & COMMENTS

MIRA’s Rating :

B

RATING		STATUS	PROPOSED CREDIT LINE
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small

Status :	Moderate
Payment Behaviour :	Slow But Correct
Litigation :	Clear

NOTES:

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – March 31, 2015

Country Name	Previous Rating (31.12.2014)	Current Rating (31.03.2015)
Malaysia	A2	A2

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

MALAYSIA - ECONOMIC OVERVIEW

Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. Under current Prime Minister NAJIB, Malaysia is attempting to achieve high-income status by 2020 and to move farther up the value-added production chain by attracting investments in Islamic finance, high technology industries, biotechnology, and services. NAJIB's Economic Transformation Program (ETP) is a series of projects and policy measures intended to accelerate the country's economic growth. The government has also taken steps to liberalize some services sub-sectors. Malaysia is vulnerable to a fall in world commodity prices or a general slowdown in global economic activity.

The NAJIB administration is continuing efforts to boost domestic demand and reduce the economy's dependence on exports. Nevertheless, exports - particularly of electronics, oil and gas, palm oil and rubber - remain a significant driver of the economy. Gross exports of goods and services constitute more than 80% of GDP. The oil and gas sector supplied about 29% of government revenue in 2014. As an oil and gas exporter, Malaysia has previously profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel, combined with sustained budget deficits, has forced Kuala Lumpur to begin to address fiscal shortfalls, through initial reductions in energy and sugar subsidies and the announcement of the 2015 implementation of a 6% goods and services tax. Falling global oil prices in the second half of 2014 have strained government finances, shrunk Malaysia’s current account surplus and put downward pressure on the ringgit. The government is trying to lessen its dependence on state oil producer Petronas.

Bank Negara Malaysia (the central bank) maintains healthy foreign exchange reserves; a well-developed regulatory regime has limited Malaysia's exposure to riskier financial instruments and the global financial crisis. In order to attract increased investment, NAJIB raised possible revisions to the special economic and social preferences accorded to ethnic Malays under the New Economic Policy of 1970, but retreated in 2013 after he encountered significant opposition from Malay nationalists and other vested interests. In September 2013 NAJIB launched the new Bumiputra Economic Empowerment Program (BEEP), policies that favor and advance the economic condition of ethnic Malays.

Malaysia is a member of the 12-nation Trans-Pacific Partnership free trade agreement negotiations and, with the nine other ASEAN members, will form the ASEAN Economic Community in 2015.

Source : CIA

EXECUTIVE SUMMARY

REGISTRATION NO.

:

721702-W

COMPANY NAME

:

NIPPON EGALV STEEL SDN. BHD.

FORMER NAME

:

E-GALV STEEL INDUSTRY SDN BHD (14/12/2009)
TA ZHENG STEEL INDUSTRY SDN BHD (21/02/2007)

INCORPORATION DATE

:

20/01/2006

COMPANY STATUS

:

EXIST

LEGAL FORM

:

PRIVATE LIMITED (LIMITED BY SHARE)

LISTED STATUS

:

NO

REGISTERED ADDRESS

:

45, JALAN PERAK, 10150 GEORGETOWN, PULAU PINANG, MALAYSIA.

BUSINESS ADDRESS

:

1617, LORONG PERUSAHAAN MAJU 6, PRAI INDUSTRIAL ESTATE IV, 13600 PRAI, PULAU PINANG, MALAYSIA.

TEL.NO.

:

04-5021155

FAX.NO.

:

04-5076688

CONTACT PERSON

:

IRURU HIDAKA ( MANAGING DIRECTOR )

INDUSTRY CODE

:

24101

PRINCIPAL ACTIVITY

:

MANUFACTURING OF ELECTRO GALVANISED STEEL

AUTHORISED CAPITAL

:

MYR 50,000,000.00 DIVIDED INTO 
ORDINARY SHARE 48,000,000.00 OF MYR 1.00 EACH.
PREFERENCE SHARE 2,000,000.00 OF MYR 1.00 EACH.

ISSUED AND PAID UP CAPITAL

:

MYR 34,360,000.00 DIVIDED INTO 
ORDINARY SHARES 32,500,000 CASH OF MYR 1.00 EACH.
PREFERENCE SHARES 1,860,000 CASH OF MYR 1.00 EACH.

SALES

:

MYR 232,753,045 [2014]

NET WORTH

:

MYR 7,599,568 [2014]

STAFF STRENGTH

:

80 [2015]

BANKER (S)

:

MALAYAN BANKING BHD

LITIGATION

:

CLEAR

DEFAULTER CHECK

:

CLEAR

FINANCIAL CONDITION

:

POOR

PAYMENT

:

POOR

MANAGEMENT CAPABILITY

:

AVERAGE

COMMERCIAL RISK

:

MODERATE

CURRENCY EXPOSURE

:

MODERATE

GENERAL REPUTATION

:

SATISFACTORY

INDUSTRY OUTLOOK

:

AVERAGE GROWTH

HISTORY / BACKGROUND

The Subject is a private limited company and is allowed to have a minimum of one and a maximum of forty-nine shareholders. As a private limited company, the Subject must have at least two directors. A private limited company is a separate legal entity from its shareholders. As a separate legal entity, the Subject is capable of owning assets, entering into contracts, sue or be sued by other companies. The liabilities of the shareholders are to the extent of the equity they have taken up and the creditors cannot claim on shareholders' personal assets even if the Subject is insolvent. The Subject is governed by the Companies Act, 1965 and the company must file its annual returns, together with its financial statements with the Registrar of Companies.

The Subject is principally engaged in the (as a / as an) manufacturing of electro galvanised steel.

The Subject is not listed on Bursa Malaysia (Malaysia Stock Exchange).

The immediate holding company of the Subject is NIPPON STEEL & SUMITOMO METAL CORPORATION, a company incorporated in JAPAN.

Former Address(es)

Address	As At Date
PLOT 33 JALAN PERUSAHAAN BUKIT MINYAK, BUKIT MINYAK INDUSTRIAL PARK, 14000, PULAU PINANG, MALAYSIA	15/02/2013

Share Capital History

Date	Authorised Shared Capital	Issue & Paid Up Capital
23/05/2014	MYR 50,000,000.00	MYR 34,360,000.00
21/07/2011	MYR 50,000,000.00	MYR 32,500,000.00
17/11/2009	MYR 25,000,000.00	MYR 22,500,000.00
25/05/2009	MYR 25,000,000.00	MYR 20,000,000.00
30/04/2008	MYR 25,000,000.00	MYR 17,800,000.00
04/04/2008	MYR 25,000,000.00	MYR 16,800,000.00
26/12/2007	MYR 25,000,000.00	MYR 15,800,000.00
03/04/2006	MYR 5,000,000.00	MYR 1,000,000.00

The major shareholder(s) of the Subject are shown as follows :

Current Shareholder(s) :

Name	Address	IC/PP/Loc No	Shareholding	(%)
NIPPON STEEL & SUMITOMO METAL CORPORATION [16282500 ORDINARY & 1278600 PREFERENCE]	6-1, MARUNOUCHI 2-CHOME, CHIYODA-KU, TOKYO, 100-8071, JAPAN.	0100-01-008848	17,561,100.00	51.11
TATT GIAP GROUP BERHAD	SUITE 2-1, MENARA PENANG GARDEN, 42-A, JALAN SULTAN AHMAD SHAH, 2ND FLOOR, 10050 PULAU PINANG, PULAU PINANG, MALAYSIA.	732294W	8,814,500.00	25.65
HANWA CO. LTD. [7,403,000 ORDINARY & 581400 PREFERENCE]	3-9, FUSHIMIMACHI 4-CHROME, CHUO-KU, OSAKA, 541-8585, JAPAN.	1200-01-077530	7,984,400.00	23.24
			---------------	------
			34,360,000.00	100.00
			============	=====

+ Also Director

Former Shareholder(s) :

Name	Country	IC/PP/Loc No	Shareholding	Last Updated
CHAI YIN CHONG	MALAYSIA	680723-05-5067	1,750,000.00	02/07/2012
HANWA CO. LTD	MALAYSIA	00019690	7,403,000.00	01/07/2014
NIPPON STEEL CORPORATION	N/A	XLZ000001814	16,282,500.00	10/04/2014
SIAH LEE BENG	MALAYSIA	500102-08-5377	N/A	N/A
TATT GIAP STEEL CENTRE SDN. BHD.	MALAYSIA	310962X	15,125,000.00	02/07/2012

DIRECTORS

DIRECTOR 1

Name Of Subject	:	MR. TAN CHENG MENG
Address	:	50, LEBOH BINJAI 2, TAMAN SRI RAMBAI, 14000 BUKIT MERTAJAM, PULAU PINANG, MALAYSIA.
IC / PP No	:	4357334
New IC No	:	521016-07-5167
Date of Birth	:	16/10/1952
Nationality	:	MALAYSIAN
Date of Appointment	:	13/09/2006

DIRECTOR 2

Name Of Subject	:	MS. TAN LU ENG
Address	:	22, LORONG CENGKEH 5, TAMAN CENGKEH, 13400 BUTTERWORTH, PULAU PINANG, MALAYSIA.
IC / PP No	:	7439151
New IC No	:	641004-07-5764
Date of Birth	:	04/10/1964
Nationality	:	MALAYSIAN
Date of Appointment	:	13/09/2006

DIRECTOR 3

Name Of Subject	:	MASATO KAGEYAMA
Address	:	1B-18-3A, PLATINO, PERSIARAN TUNKU KUDIN, 11700 GELUGOR, PULAU PINANG, MALAYSIA.
IC / PP No	:	TR1402107
Nationality	:	JAPANESE
Date of Appointment	:	01/04/2014

DIRECTOR 4

Name Of Subject	:	MR. SIAH KOK POAY
Address	:	6, LORONG TAMBUN INDAH 5, TAMAN TAMBUN INDAH, 14100 SEBERANG PRAI TENGAH, PULAU PINANG, MALAYSIA.
IC / PP No	:	4671321
New IC No	:	541010-07-5615
Date of Birth	:	10/10/1954
Nationality	:	MALAYSIAN
Date of Appointment	:	20/01/2006

DIRECTOR 5

Name Of Subject	:	MR. IRURU HIDAKA
Address	:	3C-3-9, STRAITS QUAY, JALAN SERI TANJUNG PINANG, 10470 PULAU PINANG, PULAU PINANG, MALAYSIA.
IC / PP No	:	TK2642576
Nationality	:	JAPANESE
Date of Appointment	:	28/06/2011

DIRECTOR 6

Name Of Subject	:	EBIHARA HIROSHI
Address	:	20, CECIL STREET, 20-04/05/06/07/08, EQUITY PLAZA, 049705, SINGAPORE.
IC / PP No	:	TK6120833
Nationality	:	JAPANESE
Date of Appointment	:	01/11/1954

DIRECTOR 7

Name Of Subject	:	KEN TERAI
Address	:	6-1, MARUNOUCHI 2-CHOME, CHIYODA-KU, TOKYO, 100-8071, JAPAN.
IC / PP No	:	TK3123890
Date of Appointment	:	31/03/2015

DIRECTOR 8

Name Of Subject	:	TAIZO MITSUMOTO
Address	:	6-1, MARUNOUCHI, 2-CHOME, CHIYODA-KU, TOKYO 100-8071, JAPAN
IC / PP No	:	TH4014390
Date of Appointment	:	10/07/2015

MANAGEMENT

1)	Name of Subject	:	IRURU HIDAKA
	Position	:	MANAGING DIRECTOR

AUDITOR

Auditor	:	KPMG
Auditor' Address	:	KPMG TOWER, 8 FIRST AVENUE, BANDAR UTAMA, LEVEL 10, 47800 PETALING JAYA, SELANGOR, MALAYSIA.

COMPANY SECRETARIES

1)	Company Secretary	:	MR. YEOH WEE LEE
	IC / PP No	:	A0732962
	New IC No	:	670805-07-5097
	Address	:	2B-16-7, BAYSWATER RESORT CONDOMINIUM, LEBUH TUNKU KUDIN 2, 11700 GELUGOR, PULAU PINANG, MALAYSIA.

2)	Company Secretary	:	MR. KONG HWAN KWAN @ KONG FAM KWAN
	IC / PP No	:	4487472
	New IC No	:	530922-07-5577
	Address	:	45, JALAN PERAK, 10150 GEORGETOWN, PULAU PINANG, MALAYSIA.

BANKING

Banking relations are maintained principally with :

1)

Name

:

MALAYAN BANKING BHD

ENCUMBRANCE (S)

Charge No	Creation Date	Charge Description	Chargee Name	Total Charge	Status
1	19/12/2006	FACILITY AGREEMENT	MALAYAN BANKING BERHAD	-	Satisfied
2	19/12/2006	SPECIFIC DEBENTURE OVER THE EQUIPMENT	MALAYAN BANKING BERHAD	-	Satisfied
3	24/06/2008	N/A	MALAYAN BANKING BERHAD	MYR 2,206,200.00	Satisfied
4	13/12/2010	SPECIFIC DEBENTURE OVER THE MACHINE	MALAYAN BANKING BERHAD	-	Satisfied

LITIGATION CHECK A GAINST SUBJECT

* A check has been conducted in our databank against the Subject whether the Subject has been involved in any litigation. Our databank consists of 99% of the wound up companies in Malaysia.

No legal action was found in our databank.

No winding up petition was found in our databank.

DEFAULTER CHECK AGAINST SUBJECT

* We have checked through the Subject in our defaulters' database which comprised of debtors that have been blacklisted by our customers and debtors that have been placed or assigned to us for collection.

No blacklisted record & debt collection case was found in our defaulters' databank.

PAYMENT RECORD

SOURCES OF RAW MATERIALS:
Local	:	YES
Overseas	:	YES
Import Countries	:	KOREA,JAPAN,TAIWAN

The Subject refused to provide any name of trade/service supplier and we are unable to conduct any trade enquiry. However, from financial historical data we conclude that :

OVERALL PAYMENT HABIT
Prompt 0-30 Days	[	]	Good 31-60 Days	[		]	Average 61-90 Days	[	]
Fair 91-120 Days	[	]	Poor >120 Days	[	X	]

CLIENTELE

Local	:	YES
Domestic Markets	:	MALAYSIA
Overseas	:	YES
Export Market	:	ASIA MIDDLE EAST
Credit Term	:	30 - 60 DAYS
Payment Mode	:	CHEQUES TELEGRAPHIC TRANSFER (TT)
Type of Customer	:	ELECTRICAL & ELECTRONIC INDUSTRIES,AUTOMOTIVE INDUSTRIES

OPERATIONS

Products manufactured

:

ELECTRO GALVANIZED STEEL

Ownership of premises

:

LEASED/RENTED

Total Number of Employees:
YEAR	2015	2014	2013	2011	2010
GROUP	N/A	N/A	N/A	N/A	N/A
COMPANY	80	80	80	62	60

Branch

:

NO

Other Information:

The Subject is principally engaged in the (as a / as an) manufacturing of electro galvanised steel. 

The Subject produces electro galvanized steel coils with capability to produce steel coils in thickness from 0.3mm to 2.3mm and 914mm to 1300mm in width.

By using the latest manufacturing methods and strict QC, the Subject is able to provide consistent product quality, flexible manufacturing solutions and shorter lead times.

Some of the industries that the Subject serves are including

* Computer & Peripherals
* Home Appliances
* Automotive Industry
* Consumer Electronics
* Trucking Industry
* Construction Industry
* Telecommunication Industry

CURRENT INVESTIGATION

Latest fresh investigations carried out on the Subject indicated that :

Telephone Number Provided By Client	:	N/A
Current Telephone Number	:	04-5021155
Match	:	N/A
Address Provided by Client	:	1617, LORONG PERUSAHAAN MAJU 6, PRAI INDUSTRIAL ESTATE IV,13600,PRAI,PULAU PINANG.
Current Address	:	1617, LORONG PERUSAHAAN MAJU 6, PRAI INDUSTRIAL ESTATE IV, 13600 PRAI, PULAU PINANG, MALAYSIA.
Match	:	YES
Latest Financial Accounts	:	YES

Other Investigations

We contacted one of the staff from the Subject and he provided some information.

FINANCIAL ANALYSIS

Profitability
Turnover	:	Increased	[	2010 - 2014	]
Profit/(Loss) Before Tax	:	Increased	[	2010 - 2014	]
Return on Shareholder Funds	:	Unfavourable	[	(188.55%)	]
Return on Net Assets	:	Unfavourable	[	(31.22%)	]
The Subject's turnover increased steadily as the demand for its products / services increased due to the goodwill built up over the years. Higher losses before tax during the year could be due to the higher operating costs incurred. The Subject's unfavourable returns on shareholders' funds indicate the management's inefficiency in utilising its assets to generate returns.
Liquidity
Current Ratio	:	Unfavourable	[	0.61 Times	]
Due to its weak liquidity position, the Subject will be faced with problems in meeting all its short term obligations if no short term loan is obtained or additional capital injected into the Subject.
Solvency
Liability Ratio	:	Unfavourable	[	25.50 Times	]
The Subject has high liabilities ratio and it may face financial difficulties if no additional capital is injected.
Overall Assessment :
Although the Subject's turnover increased its profits however showed a reverse trend. The losses could be due to the management's failure to maintain its competitiveness in the market. Due to its weak liquidity position, the Subject will be faced with problems in meeting all its short term obligations if no short term loan is obtained or additional capital injected into the Subject. The Subject's liabilities level was high and its going concern will be in doubt if there is no injection of additional shareholders' funds in times of economic downturn and / or high interest rates.
Overall financial condition of the Subject : POOR

MALAYSIA ECONOMIC / INDUSTRY OUTLOOK

Major Economic Indicators:	2011	2012	2013	2014*	2015**
Population ( Million)	28.7	29.3	29.8	30.3	30.5
Gross Domestic Products ( % )	5.1	5.6	5.3	6.0	6.0
Domestic Demand ( % )	8.2	9.4	5.6	6.4	6.2
Private Expenditure ( % )	8.2	8.0	8.6	7.9	6.9
Consumption ( % )	7.1	1.0	5.7	6.5	5.6
Investment ( % )	12.2	11.7	13.3	12.0	10.7
Public Expenditure ( % )	8.4	13.3	4.4	2.3	4.2
Consumption ( % )	16.1	11.3	(1.2)	2.1	3.8
Investment ( % )	(0.3)	15.9	4.2	2.6	4.7
Balance of Trade ( MYR Million )	116,058	106,300	71,298	52,314	-
Government Finance ( MYR Million )	(45,511)	(42,297)	(39,993)	(37,291)	-
Government Finance to GDP / Fiscal Deficit ( % )	(5.4)	(4.5)	(4.0)	(3.5)	(3.0)
Inflation ( % Change in Composite CPI)	3.1	1.6	2.5	3.2	4.0
Unemployment Rate	3.3	3.2	3.0	2.9	3.0
Net International Reserves ( MYR Billion )	415	427	-	417	-
Average Risk-Weighted Capital Adequacy Ratio ( % )	3.50	2.20	-	4.00	-
Average 3 Months of Non-performing Loans ( % )	14.80	14.70	-	-	-
Average Base Lending Rate ( % )	6.60	6.53	6.53	6.85	-
Business Loans Disbursed( % )	15.3	32.2	-	56.0	-
Foreign Investment ( MYR Million )	23,546.1	26,230.4	38,238.0	43,486.6	-
Consumer Loans ( % )	-	-	-	-	-
Registration of New Companies ( No. )	45,455	45,441	46,321	49,144	-
Registration of New Companies ( % )	3.0	(0.0)	1.9	6.1	-
Liquidation of Companies ( No. )	132,485	17,092	26,430	21,753	-
Liquidation of Companies ( % )	417.8	(87.1)	54.6	(17.7)	-
Registration of New Business ( No. )	284,598	324,761	329,895	332,723	-
Registration of New Business ( % )	5.0	14.0	2.0	1.0	-
Business Dissolved ( No. )	20,121	20,380	18,161	21,436	-
Business Dissolved ( % )	1.9	1.3	(10.9)	18.0	-
Sales of New Passenger Cars (' 000 Unit )	535.1	552.2	576.7	598.4	610.3
Cellular Phone Subscribers ( Million )	35.3	38.5	43.0	43.8	-
Tourist Arrival ( Million Persons )	24.7	25.0	25.7	28.0	-
Hotel Occupancy Rate ( % )	60.6	62.4	62.6	63.2	-
Credit Cards Spending ( % )	15.6	12.6	-	13.5	-
Bad Cheque Offenders (No.)	32,627	26,982	28,876	-	-
Individual Bankruptcy ( No.)	19,167	19,575	21,984	-	-
Individual Bankruptcy ( % )	5.8	2.1	12.3	-	-

INDUSTRIES ( % of Growth ):	2011	2012	2013	2014*	2015**
Agriculture	5.8	1.0	2.1	3.8	3.1
Palm Oil	10.8	(0.3)	2.6	6.7	-
Rubber	6.1	(7.9)	(10.1)	(10.4)	-
Forestry & Logging	(7.6)	(4.5)	(7.8)	(4.2)	-
Fishing	2.1	4.3	1.6	2.7	-
Other Agriculture	7.1	6.4	8.2	6.2	-
Industry Non-Performing Loans ( MYR Million )	634.1	-	-	-	-
% of Industry Non-Performing Loans	3.2	-	-	-	-
Mining	(5.4)	1.4	0.9	(0.8)	2.8
Oil & Gas	(1.7)	-	-	3.0	-
Other Mining	-	-	-	46.6	-
Industry Non-performing Loans ( MYR Million )	46.5	-	-	-	-
% of Industry Non-performing Loans	0.1	-	-	-	-
Manufacturing #	4.7	4.8	3.4	6.4	5.5
Exported-oriented Industries	4.1	6.5	3.3	5.6	-
Electrical & Electronics	(4.0)	12.7	6.9	13.3	-
Rubber Products	20.7	3.0	11.7	(0.3)	-
Wood Products	(5.1)	8.7	(2.7)	5.1	-
Textiles & Apparel	13.2	(7.1)	(2.6)	11.5	-
Domestic-oriented Industries	10.7	1.7	6.8	9.4	-
Food, Beverages & Tobacco	4.80	2.70	3.60	6.13	6.13
Chemical & Chemical Products	10.0	10.8	5.6	1.4	-
Plastic Products	3.8	-	-	2.7	-
Iron & Steel	2.2	(6.6)	5.0	0.1	-
Fabricated Metal Products	21.8	13.8	9.9	2.9	-
Non-metallic Mineral	12.1	2.9	(2.0)	5.4	-
Transport Equipment	12.0	3.4	13.8	22.9	-
Paper & Paper Products	9.5	3.1	1.8	4.7	-
Crude Oil Refineries	9.3	-	-	13.0	-
Industry Non-Performing Loans ( MYR Million )	6,537.2	-	-	-	-
% of Industry Non-Performing Loans	25.7	-	-	-	-
Construction	4.7	18.6	10.9	12.7	10.7
Industry Non-Performing Loans ( MYR Million )	3,856.9	-	-	-	-
% of Industry Non-Performing Loans	10.2	-	-	-	-
Services	7.1	6.4	5.9	5.9	5.6
Electric, Gas & Water	3.5	4.4	4.2	3.6	3.9
Transport, Storage & Communication	6.50	7.10	7.30	7.50	7.15
Wholesale, Retail, Hotel & Restaurant	5.2	4.7	5.9	6.9	6.5
Finance, Insurance & Real Estate	6.90	9.70	3.70	4.65	4.25
Government Services	12.4	9.4	8.3	6.1	5.6
Other Services	5.1	3.9	5.1	4.8	4.5
Industry Non-Performing Loans ( MYR Million )	6,825.2	-	-	-	-
% of Industry Non-Performing Loans	23.4	-	-	-	-
* Estimate / Preliminary
** Forecast
# Based On Manufacturing Production Index

INDUSTRY ANALYSIS

MSIC CODE
24101 : Production of pig iron and spiegeleisen in pigs, blocks or other primary forms
INDUSTRY :	MANUFACTURING
The manufacturing sector is expected to grow by 5.5% in 2015. It will be bolstered by strong domestic and export-oriented industries in line with growing investment activities and favorable external demand. Moreover, in 2014, the manufacturing sectors have spearheading growth. The manufacturing sector is estimated to grow at a faster pace in 2014 on higher exports of electronics and electrical (E&E) products as external demand improves.
The manufacturing sector expanded strongly during the first half of 2014, the highest growth in three years, spurred by higher global semiconductor sales. Value-added of the manufacturing sector expanded 7.1% during the first half of 2014. Production of the sector rose 6.6% in the first seven months of 2014 supported by resilient domestic demand and recovery in the external sector during the first seven months of the years. The sales value of manufactured products rebounded by 7.7% in the first seven months of 2014. The strong performance of the sector was on account of higher output at 9.4% from the domestic-oriented industries, particularly transport equipment, food and beverage.
The manufacturing sector continued to attract domestic and foreign investment with investment approved by Malaysian Investment Development Authority (MIDA) totaling RM47.4 billion during the first six months of 2014, mainly from Japan, China and Germany. Meanwhile, the capacity utilization rate remained steady at 80.4% during the second quarter of 2014 while average wage per employee and productivity improved to RM2,772 per month and 5.9%, respectively during the first seven months of 2014. Boosted by favorable domestic economic activity and recovery in the external sector, the manufacturing sector is expected to record a better performance with growth of 6.4% in 2014.
In the meantime, production of wood products rebounded by 5.1% largely supported by higher output in the saw-milling and planning of wood segment at 25.9% during the first seven months of 2014. The positive performance was attributed to vibrant residential and commercial construction activities which contributed to increased use of timber frame and glued laminated timber for cost savings compared to the use of concrete and steel. Increased demand from major export destination such as the US, Japan and Australia for Malaysian made furniture contributed to the higher output, particularly wooden and cane furniture which rebounded by 2.2%.
Production of rubber products contracted 0.3% in the first seven months of 2014 on account of slower demand for rubber gloves and rubber tyres. The decline in rubber tyres for vehicles was due to the weaker external demand from the automotive industry, particularly from China. Output of other rubber products contracted 3.8% following the product shift from rubber-based to plastics, silicones and metal alloys in the manufacture of medical devices.
Besides, exports of manufactured products are expected to grow 6.1% in 2014 boosted by the growing demand from advanced economies. However, during the first seven months of 2014, manufactured exports surged 11.4%. The robust growth was buoyed by strengthening demand in the US and EU, reflecting significant exposure of Malaysian exports to the economic performance in the advance economies. The strength in export was broad-based with robust growth in both E&E and non- E&E subsectors.
Under budget 2015, the Government will provide incentive in the form of capital allowance on automation expenditure to encourage automation in the manufacturing sector, which may help in the manufacturing sector.
OVERALL INDUSTRY OUTLOOK : Average Growth

CREDIT RISK EVALUATION & RECOMMENDATION

Incorporated in 2006, the Subject is a Private Limited company, focusing on manufacturing of electro galvanised steel. Having been in the industry for over a decade, the Subject has achieved a certain market share and has built up a satisfactory reputation in the market. It should have received supports from its regular customers. We noted that the issued and paid up capital of the Subject stands at MYR 34,360,000 and having strong backing from its holding company.

Over the years, the Subject has penetrated into both the local and overseas market. The Subject has positioned itself in the global market and is competing in the industry. Its stable clientele base will enable the Subject to further enhance its business in the near term. Being a moderate size company, the Subject has a total workforce of 80 employees in its business operations. Overall, we regard that the Subject's management capability is average. This indicates that the Subject has greater potential to improve its business performance and raising income for the Subject. 

Despite the higher turnover, the Subject suffered pre-tax losses which reflected a highly competitive business environment. The Subject has generated an unfavourable return on shareholders' funds indicating that the management was inefficient in utilising its funds to generate return. Due to its weak liquidity position, the Subject may face working capital deficiency in meeting its short term financial obligations if no fresh capital are injected into the Subject. The Subject has high liabilities ratio and it may face financial difficulties if no additional capital is injected. Given a positive net worth standing at MYR 7,599,568, the Subject should be able to maintain its business in the near terms.

The Subject's supplier are from both the local and overseas countries. This will eliminates the risk of dependency on deliveries from a number of key suppliers and insufficient quantities of its raw materials. Overall the Subject has a good control over its resources.

The poor payment habit may affect the goodwill between the Subject and its suppliers and the Subject may inadvertently have to pay more for its future supplies. 

The industry shows an upward trend and this trend is very likely to sustain in the near terms. 

In view of the above, we only recommend credit be proceeded to the Subject with guarantee.

PROFIT AND LOSS ACCOUNT

THE FINANCIAL STATEMENTS WERE PREPARED IN ACCORDANCE WITH MALAYSIAN FINANCIAL REPORTING STANDARDS(FRS)

NIPPON EGALV STEEL SDN. BHD.

Financial Year End	2014-12-31	2013-12-31	2012-12-31	2011-12-31	2010-12-31
Months	12	12	12	12	12
Consolidated Account	Company	Company	Company	Company	Company
Audited Account	YES	YES	YES	YES	YES
Unqualified Auditor's Report (Clean Opinion)	YES	YES	YES	YES	YES
Financial Type	SUMMARY	FULL	FULL	FULL	FULL
Currency	MYR	MYR	MYR	MYR	MYR
TURNOVER	232,753,045	170,919,626	143,724,356	96,099,558	89,028,630
	----------------	----------------	----------------	----------------	----------------
Total Turnover	232,753,045	170,919,626	143,724,356	96,099,558	89,028,630
Costs of Goods Sold	-	(165,113,625)	(162,054,274)	(110,742,543)	(92,471,027)
	----------------	----------------	----------------	----------------	----------------
Gross Profit	-	5,806,001	(18,329,918)	(14,642,985)	(3,442,397)
	----------------	----------------	----------------	----------------	----------------
PROFIT/(LOSS) FROM OPERATIONS	(14,655,366)	(9,684,151)	(27,183,174)	(24,975,827)	(9,506,054)
	----------------	----------------	----------------	----------------	----------------
PROFIT/(LOSS) BEFORE TAXATION	(14,655,366)	(9,684,151)	(27,183,174)	(24,975,827)	(9,506,054)
Taxation	326,110	355,531	355,531	355,531	355,531
	----------------	----------------	----------------	----------------	----------------
PROFIT/(LOSS) AFTER TAXATION	(14,329,256)	(9,328,620)	(26,827,643)	(24,620,296)	(9,150,523)
	----------------	----------------	----------------	----------------	----------------
RETAINED PROFIT/(LOSS) BROUGHT FORWARD
As previously reported	(42,921,176)	(33,592,556)	(6,764,913)	(14,142,389)	(4,991,866)
Prior year adjustment	-	-	-	31,997,772	-
	----------------	----------------	----------------	----------------	----------------
As restated	(42,921,176)	(33,592,556)	(6,764,913)	17,855,383	(4,991,866)
	----------------	----------------	----------------	----------------	----------------
PROFIT AVAILABLE FOR APPROPRIATIONS	(57,250,432)	(42,921,176)	(33,592,556)	(6,764,913)	(14,142,389)
	----------------	----------------	----------------	----------------	----------------
RETAINED PROFIT/(LOSS) CARRIED FORWARD	(57,250,432)	(42,921,176)	(33,592,556)	(6,764,913)	(14,142,389)
	=============	=============	=============	=============	=============

INTEREST EXPENSE (as per notes to P&L)
Bankers' acceptance	-	-	-	285,710	-
Hire purchase	-	-	-	-	84,636
Lease interest	-	63,898	50,852	73,969	-
Revolving loans	-	3,525,599	2,668,851	259,345	-
Term loan / Borrowing	-	-	-	1,139,651	1,063,222
Trust receipts	-	-	-	295,601	352,095
Others	-	326,983	364,486	748,279	1,203,928
	----------------	----------------	----------------	----------------	----------------
	-	3,916,480	3,084,189	2,802,555	2,703,881
	-	=============	=============	=============	=============
DEPRECIATION (as per notes to P&L)	-	6,207,716	6,373,936	6,142,997	5,188,788
	----------------	----------------	----------------	----------------	----------------
	-	6,207,716	6,373,936	6,142,997	5,188,788
	=============	=============	=============	=============	=============

BALANCE SHEET

NIPPON EGALV STEEL SDN. BHD.

ASSETS EMPLOYED:
FIXED ASSETS	106,510,901	111,516,065	116,450,849	118,182,244	107,290,786
	----------------	----------------	----------------	----------------	----------------
TOTAL LONG TERM ASSETS	106,510,901	111,516,065	116,450,849	118,182,244	107,290,786
Stocks	-	27,797,943	56,827,219	14,746,137	9,042,257
Trade debtors	-	18,440,741	14,930,557	6,427,402	10,518,336
Other debtors, deposits & prepayments	-	1,005,799	2,410,473	688,267	8,005,693
Short term deposits	-	-	444,368	418,856	418,856
Cash & bank balances	-	14,079,088	3,055,903	4,751,803	852,273
Others	-	941,116	-	-	-
	----------------	----------------	----------------	----------------	----------------
TOTAL CURRENT ASSETS	94,853,494	62,264,687	77,668,520	27,032,465	28,837,415
	----------------	----------------	----------------	----------------	----------------
TOTAL ASSET	201,364,395	173,780,752	194,119,369	145,214,709	136,128,201
	=============	=============	=============	=============	=============
CURRENT LIABILITIES
Trade creditors	-	54,578,016	54,351,148	41,113,793	9,268,276
Other creditors & accruals	-	3,330,398	2,926,052	24,010,097	5,307,384
Hire purchase & lease creditors	-	524,365	91,738	549,927	398,358
Short term borrowings/Term loans	-	-	-	-	2,650,711
Other borrowings	-	33,000,000	95,000,000	29,500,000	2,247,455
Bill & acceptances payable	-	-	-	-	14,116,000
Amounts owing to holding company	-	326,412	766,764	-	9,014,087
Amounts owing to related companies	-	19,714,625	18,434,262	-	97
Other liabilities	-	366,102	-	-	24,619,294
	----------------	----------------	----------------	----------------	----------------
TOTAL CURRENT LIABILITIES	154,429,175	111,839,918	171,569,964	95,173,817	67,621,662
	----------------	----------------	----------------	----------------	----------------
NET CURRENT ASSETS/(LIABILITIES)	(59,575,681)	(49,575,231)	(93,901,444)	(68,141,352)	(38,784,247)
	----------------	----------------	----------------	----------------	----------------
TOTAL NET ASSETS	46,935,220	61,940,834	22,549,405	50,040,892	68,506,539
	=============	=============	=============	=============	=============
SHARE CAPITAL
Ordinary share capital	34,360,000	34,360,000	32,500,000	32,500,000	22,500,000
	----------------	----------------	----------------	----------------	----------------
TOTAL SHARE CAPITAL	34,360,000	34,360,000	32,500,000	32,500,000	22,500,000
RESERVES
Share premium	30,490,000	30,490,000	13,750,000	13,750,000	2,500,000
Revaluation reserve	-	-	-	-	31,997,772
Retained profit/(loss) carried forward	(57,250,432)	(42,921,176)	(33,592,556)	(6,764,913)	(14,142,389)
	----------------	----------------	----------------	----------------	----------------
TOTAL RESERVES	(26,760,432)	(12,431,176)	(19,842,556)	6,985,087	20,355,383
	----------------	----------------	----------------	----------------	----------------
SHAREHOLDERS' FUNDS/EQUITY	7,599,568	21,928,824	12,657,444	39,485,087	42,855,383
Long term loans	-	30,000,000	-	-	14,779,049
Lease obligations	-	768,210	292,630	600,943	-
Hire purchase creditors	-	-	-	-	561,714
Deferred taxation	-	9,243,800	9,599,331	9,954,862	10,310,393
	----------------	----------------	----------------	----------------	----------------
TOTAL LONG TERM LIABILITIES	39,335,652	40,012,010	9,891,961	10,555,805	25,651,156
	----------------	----------------	----------------	----------------	----------------
	46,935,220	61,940,834	22,549,405	50,040,892	68,506,539
	=============	=============	=============	=============	=============

FINANCIAL RATIO

NIPPON EGALV STEEL SDN. BHD.

TYPES OF FUNDS
Cash	-	14,079,088	3,500,271	5,170,659	1,271,129
Net Liquid Funds	-	14,079,088	3,500,271	5,170,659	(12,844,871)
Net Liquid Assets	(59,575,681)	(77,373,174)	(150,728,663)	(82,887,489)	(47,826,504)
Net Current Assets/(Liabilities)	(59,575,681)	(49,575,231)	(93,901,444)	(68,141,352)	(38,784,247)
Net Tangible Assets	46,935,220	61,940,834	22,549,405	50,040,892	68,506,539
Net Monetary Assets	(98,911,333)	(117,385,184)	(160,620,624)	(93,443,294)	(73,477,660)
PROFIT & LOSS ITEMS
Earnings Before Interest & Tax (EBIT)	-	(5,767,671)	(24,098,985)	(22,173,272)	(6,802,173)
Earnings Before Interest, Taxes, Depreciation And Amortization (EBITDA)	-	440,045	(17,725,049)	(16,030,275)	(1,613,385)
BALANCE SHEET ITEMS
Total Borrowings	-	67,818,174	98,053,219	30,910,215	34,753,287
Total Liabilities	193,764,827	151,851,928	181,461,925	105,729,622	93,272,818
Total Assets	201,364,395	173,780,752	194,119,369	145,214,709	136,128,201
Net Assets	46,935,220	61,940,834	22,549,405	50,040,892	68,506,539
Net Assets Backing	7,599,568	21,928,824	12,657,444	39,485,087	42,855,383
Shareholders' Funds	7,599,568	21,928,824	12,657,444	39,485,087	42,855,383
Total Share Capital	34,360,000	34,360,000	32,500,000	32,500,000	22,500,000
Total Reserves	(26,760,432)	(12,431,176)	(19,842,556)	6,985,087	20,355,383
LIQUIDITY (Times)
Cash Ratio	-	0.13	0.02	0.05	0.02
Liquid Ratio	-	0.31	0.12	0.13	0.29
Current Ratio	0.61	0.56	0.45	0.28	0.43
WORKING CAPITAL CONTROL (Days)
Stock Ratio	-	59	144	56	37
Debtors Ratio	-	39	38	24	43
Creditors Ratio	-	121	122	136	37
SOLVENCY RATIOS (Times)
Gearing Ratio	-	3.09	7.75	0.78	0.81
Liabilities Ratio	25.50	6.92	14.34	2.68	2.18
Times Interest Earned Ratio	-	(1.47)	(7.81)	(7.91)	(2.52)
Assets Backing Ratio	1.37	1.80	0.69	1.54	3.04
PERFORMANCE RATIO (%)
Operating Profit Margin	(6.30)	(5.67)	(18.91)	(25.99)	(10.68)
Net Profit Margin	(6.16)	(5.46)	(18.67)	(25.62)	(10.28)
Return On Net Assets	(31.22)	(9.31)	(106.87)	(44.31)	(9.93)
Return On Capital Employed	(31.22)	(8.74)	(95.22)	(43.61)	(9.87)
Return On Shareholders' Funds/Equity	(188.55)	(42.54)	(211.95)	(62.35)	(21.35)
Dividend Pay Out Ratio (Times)	-	0	0	0	0
NOTES TO ACCOUNTS
Contingent Liabilities	-	0	0	0	0

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.64.96
UK Pound	1	Rs.99.54
Euro	1	Rs.71.64

INFORMATION DETAILS

Analysis Done by :	RSM
Report Prepared by :	DPT

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
--	NB	New Business	--

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

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