Fitch affirms Aneka Gas Industri at 'A-(idn)'/stable

(Jakarta/Sydney-12 June 2013) -- Fitch Ratings has affirmed Indonesia-based industrial gas producer PT Aneka Gas Industri's (AGI) National Long-Term rating at 'A-(idn)' with Stable Outlook. At the same time, the agency has also affirmed the ratings for AGI's IDR80bn bond I and IDR160bn sukuk ijarah I year 2008 due on July 2013 and IDR200bn bond II and IDR200bn sukuk ijarah II year 2012 due on December 2017 at 'A-(idn)'.

Established market position: AGI's ratings reflect its dominant position as Indonesia's leading industrial gas producer with a widespread distribution network across the country. Together with its sister company PT Samator, AGI controls approximately 50% of Indonesia's industrial gas market and a 90% share in medical gas. High initial capital investment required for the industry provides high barriers to entry which should ensure that AGI maintains a strong market share over the medium term.

Scale and metrics improvement: AGI's has been investing in capacity expansion since 2009 which has improved the company's scale. During 2009-2012, revenue has been growing consistently with a strong average growth of 23%. EBITDA margin has also improved to 27.3% in 2012 from 25.5% in 2009 due to higher plant utilisation and increasing exposure to the retail segment with higher margin.

Stability of cashflow from long-term contracts: Fitch draws comfort from the fact that 60% of AGI's revenue in 2012 was from long-term contracts with an average contract term of six years. This provides strong visibility on cash flow generation.

Size and capex constraints: Despite strong revenue growth, AGI's ratings are constrained by its small scale and its heavy capex plan for 2013 and 2014. AGI will continue its plant expansion in the next two years by building two additional plants in Bontang and Palembang. Nevertheless, Fitch expects the company's leverage to remain appropriate for its ratings over the next three years at net debt/EBITDA of below 3.5x (2012: 3.3x).

Manageable execution risk: The ratings are supported by the company's track record in managing execution risk in the past 3 years. Despite the company's continuous expansion since 2009, cost and time overruns have been minimal. The agency also derives comfort from the fact that expansion has been generally supported by contracted revenues and equity injection from shareholders. (ends)