JCR-VIS Assigns Initial Ratings to Best Exports (Private) Limited

Karachi, November 05, 2018 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘BBB/A-2’ (Triple B/A-Two) to Best Exports (Pvt.) Limited (BEL). The medium to long-term rating of ‘BBB’ denotes adequate credit quality coupled with reasonable and sufficient protection factors. Moreover, risk factors are considered variable 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 and risk factors considered small. Outlook on the assigned ratings is ‘Stable’.

BEL is a medium sized export-oriented weaving and made-ups unit located in Faisalabad. Shareholding of the company is vested with Mr. Waqas Ali who assumed full control of the company after its spin-off from spinning business. Product portfolio of BEL mainly comprises grey and dyed/printed fabric and made-ups. Made-ups including bed sets, pillow covers, quilt covers, cotton bags, table covers and curtains accounted for more than half of export sales in FY18. While the company has been able to tap various export avenues in order to rationalize geographical concentration, Europe has remained a primary market for export sales over the years. Customer concentration remains a risk for the company.

The ratings take into account BEL’s presence in export oriented value-added textile segment and experienced management team. However, ratings are constraint by limited scale of operations and margins coupled with old plant and machinery leading to efficiency challenges amidst stiff competition. The management’s prudent expansion strategy while maintaining a low leverage capital structure and adequate debt service coverage are among the positive rating drivers.

Given the low funds from operations and high cash conversion cycle, the company is primarily managing its working capital requirement through short-term borrowings. Currently, there is no long term debt on books; the management is considering to mobilize long-term finances to partly fund a vertical integration project in FY20 that is currently being evaluated. The project is planned to be financed through a combination of long term debt and equity. Going forward, leverage indicators may increase, though gearing is projected to remain low. The ratings remain dependent on sales and margin growth while maintaining adequate debt service coverage and a low leverage capital structure.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk