Press Release
JCR-VIS Reaffirms Ratings of Allied Rental Modaraba at A+/A-1
Karachi, December 28, 2015: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Allied Rental Modaraba (ARM) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 29, 2014.
The assigned ratings reflect sound financial risk profile of the modaraba as evident from adequate liquidity profile and capitalization levels. Philosophy of the sponsors in maintaining gearing at conservative levels is also a key rating factor. Profitability and cash flow metrics of the company have witnessed pressure during FY15 and in the ongoing year but remain commensurate with the outstanding rating of the company. Ratings continue to derive strength from the arrangement with Allied Engineering Services Limited (AESL), which is the sole dealer for Caterpillar products in Pakistan and authorized dealer of other leading material handling equipment.
ARM continued to expand its rental fleet during FY15 with over Rs. 1.3b additional investment in rental assets. However, revenues depicted modest growth during FY15. In terms of segment wise break-up of revenues, decline was witnessed in Ijarah rental revenues from gensets business (due to non-availability of gas and pressure on financial performance of the textile sector) while growth was seen in logistics and material handling equipment/forklift segment. Going forward, management expects proportion of revenues from logistics and material handling equipment/forklift segment to increase further. Moreover, revenue from gensets segment is also expected to pick pace again with the finalization of LNG prices. Management is also diversifying revenue streams through introduction of newer products (FO based gensets & Zinc Acid Batteries) impact of which is expected to materialize in the latter half of FY16.
Profitability witnessed a decline during FY15 due to higher depreciation charge, decline in proportion of business from high margin segment (gensets) and increase in finance cost. Future profitability will remain a function of deployment level of rental fleet, maintaining margins at adequate levels and revenues from new projects being undertaken by the management.
Liquidity profile of the company is satisfactory in view of adequate cash flow from operations. Ageing profile of receivables has weakened slightly at end-FY15; exposure to credit risk of ARM is considered manageable with assets written in the ownership of the modaraba itself. Debt & dividend payments and capex for FY16 are planned to be funded through a mix of internal generation, funds raised from rights issue and additional borrowings.
For further information on this rating announcement, please contact the undersigned (Ext: 516) or Mr. Javed Callea (Ext: 501) at 35311861-70 (10 lines) or fax to 35311873.
Jamal Abbas Zaidi
Advisor
Applicable Rating Criteria: Modaraba Rating Scale October 2002
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