PEFINDO affirms its “idA-” rating to PT Industri Kereta Api Indonesia (Persero)
Wednesday, December 4 2019 - 12:19 AM WIB
(December 3, 2019)--PEFINDO has affirmed its “idA-” rating to PT Industri Kereta Api Indonesia (Persero) (INKA). The outlook for the corporate rating is “stable”.
An obligor rated idA has a strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors.
However, it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than higher rated obligors.
The minus (-) sign indicates that the rating is relatively weak within the respective rating category.
The corporate rating reflects INKA’s strong support from the government, its leading market position in rolling stock manufacturing, and potential higher revenue from railway infrastructure development and broadened market scope. The rating is constrained by its aggressive capital structure, weak cash flow protection measures, and exposure to the fluctuation of raw material and component costs.
Any possibility of a rating upgrade in the next 12-18 months is limited, as the rating takes into account our expectation that INKA will properly execute its business plan. We may raise the rating if its performance is above our expectations, which should also be accompanied by significant improvement in its capital structure and cash flow protection measures. The rating could be lowered if its delivery plan in the near term is delayed, resulting in weaker than expected capital structure and cash flow protection measures. The rating could also be under pressure if it adds significantly larger debt than expected, causing its key financial ratios to deteriorate beyond our projections.
INKA is a state-owned manufacturing company that mainly produces rolling stock products, and is the only player in Southeast Asia in this industry. Its products include passenger coaches, freight wagons, electric railcar multiple units (EMU), diesel railcar multiple units (DMU), locomotives, bogies, engineering, procurement and construction (EPC projects), and rail-related services. To support its main business, it has two subsidiaries: PT Inka Multi Solusi, engaged in the trading of railroad car components, and PT Rekaindo Global Jasa, engaged in maintenance and repair in railway carriage-related services. As of September 30, 2019, it was wholly owned by the Indonesian government. (ends)