Press Release

VIS Revises Entity Ratings of Waves Singer Pakistan Limited

Karachi, November 13, 2020: VIS Credit Rating Company Limited (VIS) has revised the entity ratings of Waves Singer Pakistan Limited (WSPL) from ‘A/A-1’ (Single A/A-One) to ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on November 21, 2019.

WSPL, the holding company, is principally engaged in retailing and trading of domestic consumer appliances and other light engineering products, besides the manufacturing and assembling of the same. The ratings take into account consolidated numbers of all group companies and incorporate that the marketing arrangements, having favorable impact on consolidated gross margins, will continue within the group companies. The ratings also factor in considerable brand recognition and market penetration of WSPL into the consumer durable industry of Pakistan, particularly in the deep freezer, refrigerator and sewing machine categories. WSPL is planning to initiate affordable housing development project at the company-owned land after relocation of factory. The project is expected to generate additional cash flows in the medium to long-term.

The company managed to increase revenue during CY19 on the back of both higher sale of units and average price. However, bottom line was largely maintained at the previous year’s level mainly on account of increase in interest expense and higher taxation. The economic slowdown, outbreak of COVID-19 and following lockdown situation resulted in lower revenues during 9MCY20. The gross margins also decreased as the company could not pass the full impact of rupee deprecation onto consumers.

The ratings draw comfort from manageable leverage on consolidated basis despite increase in debt utilization over the period under review. Debt service coverage ratio decreased during 9MCY20; the management expects the same to improve, going forward. The decrease in interest rate is also expected to bode well for the company. The ratings are sensitive to, increasing uncertainty surrounding second waves of COVID-19, increasing trade receivables and inventories on a timeline basis which are impacting liquidity, high price sensitivity owing to discretionary nature of spending on durable goods, and vulnerability to foreign exchange risk.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 201) or email at info@vis.com.pk


Faheem Ahmad
CEO

VIS Entity Rating Criteria: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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