Press Release
VIS assigns initial Entity Ratings to Shaheen Freight Services
Karachi, July 27, 2020: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B Plus/A-2) to Shaheen Freight Services. The long term rating of BBB+ signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable with possible changes in the economy. The short term rating of ‘A-2’ signifies good certainty of timely payment; liquidity factors and company fundamentals are sound. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.
Shaheen Freight Services (SFS) is a partnership firm founded in 1994. It is engaged in provision of logistics, distribution and storage services across Pakistan and Afghanistan. Portfolio of services offered by the company includes transportation of rigs, liquid cargo, bulk cargo, bonded cargo and empty containers, movement of projects equipment, container storage facilities, custom clearance, and filling stations and fuel delivery.
The assigned ratings incorporate moderate business risk profile, and healthy financial profile. Given the private shareholding structure, corporate governance framework depicts room for improvement. Business risk profile derives support from considerable exposure to transportation of oil from production/import facilities to various storage facilities/oil refineries, which requires specialized transport equipment and storage infrastructure. Hence, competition is limited in this segment.
Assessment of the financial risk profile indicates sizeable growth in topline during the last three years. Increase in client base and volumetric increase were the primary drivers of growth in topline. Given the diverse range of services offered by the company and specialized nature of business operations, margins are on the higher side vis-à-vis other transportation companies. Replacement of fleet has contributed to improvement in margins on a timeline basis. Although, the company has managed to add new clients to its overall portfolio during the ongoing year, future outlook on sales and profitability is largely dependent upon pace of the recovery of economy which has been affected due to COVID-19. Nevertheless, having a diversified client base including customers with stable demand pattern partly provides comfort to the overall risk profile of the company.
Equity base has registered considerable increase on a timeline basis due to profit retention. Although debt has also grown on a timeline basis due to fleet financing requirement, overall leverage indicators have remained at manageable levels. Going forward, leverage indicators are expected to remain at existing levels as the management does not have any major capex plans over the rating horizon. With growth in profitability, cash flows have also improved. Liquidity profile is considered adequate in the light of healthy coverage ratios.
For further information on this rating announcement, please contact Mr. Narendar Shankar Lal (Ext: 203) or the undersigned (Ext: 101) at (021) 35311861-66 or email at info@vis.com.pk.
Saeed Khan
Executive Finance Director
Applicable Rating Criteria: Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf