JCR-VIS Reaffirms Entity Ratings of Sindh Modaraba

Karachi, February 22, 2019 (PPI-OT): JCR-VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Sindh Modaraba (SM) at ‘A+/A-1’ (Single A Plus/A-One). The long term rating signifies good credit quality with adequate protection factors. Risk may vary slightly from time to time because of economic conditions. Short term rating of ‘A-1’ depicts high certainty of timely payment where liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 29, 2017.

The assigned ratings of Sindh Modaraba (SM) derive strength from its indirect ownership by the Government of Sindh (GoS) through Sindh Modaraba Management Limited. Strong sponsor support has been demonstrated through both financial and technical assistance. The company benefits from the experience of its Board members. In line with the Board’s conservative stance, financing portfolio of the company has increased at a slow pace with sound asset quality indicators. Management anticipates a similar trend in portfolio growth in order to keep infection at minimal levels. Ratings will be contingent on continued maintenance of strong quality of assets.

Capitalization indicators of SM are considered sound as the company has not mobilized any interest bearing debt. Along with a sizeable equity, SM has obtained an interest free loan of Rs. 500m from SMML, which is repayable at the discretion of SM. Liquidity profile of the company is manageable given the sizeable proportion of liquid assets in relation to total liabilities.

With a higher financing portfolio vis-à-vis last year, the company was able to earn an improved top line. In the backdrop of an increasing interest rate scenario, the company anticipates revenue base of SM to grow. Efficiency ratio has also remained at manageable levels for the company over the years. Management anticipates profitability levels to further improve with ongoing prudent underwriting. Profitability indicators will need to be maintained to be commensurate with the assigned rating.

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

JCR-VIS Credit Rating Company Reaffirms Entity Ratings of Bhanero Textile Mills Limited

Karachi, February 21, 2019 (PPI-OT): JCR-VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Bhanero Textile Mills Limited (BHAT) at ‘A+/A-1’ (Single A Plus/A-One). Long Term Rating of A+ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of A-1 indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and risk factors are minor. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on September 28, 2017.

Ratings assigned to the company favourably factor in the sound financial risk profile as reflected by healthy liquidity profile, low leverage indicators and improving earnings. Ratings also factor the healthy sales growth posted in FY18 and in the ongoing year. Going forward, growth momentum in sales is projected to continue on the back of significant rupee depreciation during FY18 and in ongoing year, increase in international yarn prices and addition of new spindles (10,800) during 2018. The ratings also take into account the extensive experience of sponsor (Umer Group) in the textile industry spanning over four decades with well-diversified customer base spread across international markets. Ratings are constrained by high cyclicality and competitive intensity for spinning industry and volatility in cotton prices which translate into moderate to high business risk profile.

Umer Group is recognized as a prominent player in spinning and weaving segment with annual turnover of around Rs. 30b. Around one-half of total group sales comprise exports with major markets in China, Italy, Japan, Turkey and Belgium and other European countries. Segment wise, three-fifth of revenue is generated through spinning segment while the remaining comprises sales of greige fabric. Going forward, given the favourable incentives for enhancing exports along with significant rupee depreciation, management expects proportion of export sales in sales mix to increase to around two-third of total sales. Umer Group has a total of 186,960 spindles and 565 looms.

Historically, around two-third of BHAT’s topline has comprised local sales. Segment wise yarn continues to be the major contributor with 65% share in total revenue. Moreover, yarn sales have gained foothold in the domestic market whereas weaving segment largely comprises exports. Efficient raw material procurement, higher sales volume in the spinning segment and increased average sales prices of yarn and fabric have resulted in improved gross margins. Going forward, future margins are expected improve further given that average inventory carried on balance sheet is significantly lower than current cotton prices. Liquidity profile also draws support from management’s conservative approach of maintaining long term debt repayments lower than depreciation charge during any given period, thus providing the financial flexibility to undertake expansion projects.

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

JCR-VIS Credit Rating Company Reaffirms Entity Ratings of Faisal Spinning Mills Limited

Karachi, February 21, 2019 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Faisal Spinning Mills Limited (FSML) at ‘A/A-1’ (Single A/A-One). Long Term Rating of A- reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of A-1 indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and risk factors are minor. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on March 30, 2018.

The ratings reaffirmation takes into account FSML’s conservative financial policy as reflected by low leverage indicators and strong liquidity profile and debt servicing ability. Sponsor’s (Umer Group) extensive experience of more than four decades in textile industry, sound track record and established business reputation are also incorporated positively in the assigned ratings. Ratings also factor in the company’s healthy growth in topline on a timeline basis. Ratings are constrained by high cyclicality and competitive intensity for spinning industry and volatility in cotton prices which translate into moderate to high business risk profile.

Umer Group is recognized as a prominent player in spinning and weaving segment with annual turnover of around Rs. 30b. Around one-half of total group sales comprise exports with presence in China, Italy, Japan, Turkey and Belgium and other European countries. Segment wise, three-fifth of revenue is generated through spinning segment while the remaining comprises sales of greige fabric. Going forward, given the favourable incentives for enhancing exports along with significant rupee depreciation, management expects proportion of export sales in sales mix to increase to around two-third of total sales. Umer Group has a total of 186,960 spindles and 565 looms.

Profitability of the company was reported higher in 1QFY19 and FY18 vis-à-vis the corresponding periods. Operating margins (gross and net) were also reported higher on account of increase in topline, efficient raw material procurement and increasing demand of fabric in local market. Going forward, future margins are expected improve further given that average inventory carried on balance sheet is significantly lower than current cotton prices. Liquidity profile is considered sound on the back of healthy cash flows in relation of outstanding debt obligations. Inventory and trade debts provide sound coverage for short-term debt obligations. Equity base has increased over time on the back of increased retained earnings.

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

JCR-VIS Credit Rating Company Reaffirm Entity Ratings of Blessed Textiles Limited

Karachi, February 21, 2019 (PPI-OT): JCR-VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Blessed Textiles Limited (BTL) at ‘A-/A-1’ (Single A Minus/A-One). Long Term Rating of A- reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of A-1 indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and risk factors are minor. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on March 30, 2018.

The ratings reaffirmation continues to factor in the extensive experience of sponsor (Umer Group) with more than four decades in the textile industry. Financial risk profile of the company is considered as sound as indicated by sound liquidity profile and improving profitability metrics. Ratings also incorporate the healthy revenue growth posted in FY18 and in the ongoing year. Ratings are, however, constrained by company’s higher leverage indicators vis-à-vis rating benchmarks and high cyclicality and competitive intensity for spinning industry and volatility in cotton prices which translate into high business risk profile.

Umer Group is recognized as a prominent player in spinning and weaving segment with annual turnover of around Rs. 30b. Around one-half of total group sales comprise exports with presence in China, Italy, Japan, Turkey and Belgium and other European countries. Segment wise, three-fifth of revenue is generated through spinning segment while the remaining comprises sales of greige fabric. Going forward, given the favourable incentives for enhancing exports along with significant rupee depreciation, management expects proportion of export sales in sales mix to increase to around two-third of total sales. Umer Group has a total of 186,960 spindles and 565 looms.

During FY18 and 1QFY19, currency devaluation, higher volumes sold, increase in average selling prices and rebate on export sales aided growth in BTL’s revenue base. Going forward, management’s strong focus to increase proportion of export sales in both spinning and weaving segment would translate in to higher sales volumes. Overall profitability margins improved through efficient procurement of raw material. Given that management has already completed purchase of its cotton requirements for FY19 and some part of FY20 at competitive rates, overall margins are expected to continue to improve. Overall liquidity profile is considered adequate as indicated by satisfactory cash flows in relation to debt obligations. Gearing and leverage ratios have remained elevated due to higher short term borrowings to fund increase in inventory in anticipation of increase in cotton prices.

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

VIS Credit Rating Company Assigns Initial Ratings of Faran Sugar Mills Limited

Karachi, February 20, 2019 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned the initial entity ratings to Faran Sugar Mills Limited (FSML) at ‘A-/A-2’ (A minus/A – Two). The long term rating signifies good credit quality with adequate protection factors. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ depicts good certainty of timely payment. Liquidity factors and company fundamentals are sound with good access to capital markets. Risk factors are small.

Outlook on the assigned ratings is ‘Stable’. Assigned ratings of FSML derive strength from its sponsor, Amin Bawany Group, an experienced business group of the country. Ratings reflect moderate financial and business risk profile along with adequate corporate governance framework.

Current ratings are constrained by inherent business risk present with volatility in sugar prices in particular and commodity prices in general. Depressed sugar prices in last few years have put pressure on sugar segment margins in the backdrop of regulated cane prices. However, bottom line of the company is also supported by revenues from its associates specifically from its ethanol unit. With anticipated growth in revenue from ethanol in view of currency depreciation, profits from the same will provide impetus to FSML’s profitability.

Leverage indicators of the company are considered adequate. Debt profile of the company largely comprises short term borrowing utilized to finance its working capital. Given that management has no plans for capital expenditure in the near future, leverage indicators are projected to remain sound. Ratings will be contingent on maintenance of sustainable performance metrics and adequate leverage indicators.

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

JCR-VIS Reaffirms Broker Management Rating of Topline Securities Limited

Karachi, February 06, 2019 (PPI-OT): JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the Broker Management Rating of Topline Securities Limited (TSPL) at ‘BMR2’. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on November 7, 2017. The rating signifies strong HR and IT services; sound external control and risk management along with adequate regulatory compliance levels, internal control framework, client relationship and financial management.

The rating continues to factor in TSPL’s adequate compliance to regulations and board level governance; however; constitution of Board level Risk Management Committee would further add to corporate governance standards. Independent director chairing the BAC Committee is in line with international best practices.

Internal control environment is considered effective with sufficient and well-defined policies. Conflict of interest policy is duly being shared with both staff and clients in order to strengthen controls. More stringent employee trading guidelines would enhance the control environment. Moreover, earning profile of the company has remained under pressure due to decline in market volumes. Operating efficiency was reported higher during FY18 on account of decline in brokerage revenue; however the same compares well to peers. Going forward, diversification in revenue streams is expected given corporate finance and advisory service pipeline.

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

JCR-VIS Withdraws Entity Ratings of Thatta Cement Company Limited

Karachi, January 30, 2019 (PPI-OT): JCR-VIS Credit Rating Company Limited has withdrawn the entity ratings of A-/A-2 (Single A Minus/A-Two) assigned to Thatta Cement Company Limited (TCCL) with immediate effect on account of management’s decision to discontinue the ratings.

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