PEFINDO affirms PT Ricobana Abadi (RICO)’s rating at “idBBB-”
Saturday, December 7 2019 - 04:28 PM WIB
(December 6, 2019)--PEFINDO has affirmed its “idBBB-” ratings for PT Ricobana Abadi (RICO) and its Medium-Term Notes (MTN) I Year 2017. The outlook for the corporate rating is “stable”.
An obligor rated idBBB has an adequate capacity to meet its long-term financial commitments relative to that of other Indonesian obligors. However, adverse economic conditions or changing circumstances are more likely to weaken its capacity to meet its financial commitments.
The minus (-) sign indicates that the rating is relatively weak within the respective rating category.
The rating reflects RICO’s experienced management team with conservative approach and adequate cash flow protection measures.
However, the rating is constrained by the Company’s concentration in certain customers, small market position in the coal mining contractor industry, and exposure to the fluctuation of coal price.
The rating could be raised if RICO strengthens its market position in the coal mining contractor industry as reflected by gaining new contracts as well as diversifying customer profile which could significantly increase its revenue and reduce its dependency on certain customers. This should also be supported by improving profitability margins and financial profile with debt to EBITDA ratio below 2.0x on a sustained basis. However, the rating could be lowered if the Company aggressively finances its expansion with substantially larger debt than projected, without being compensated by stronger revenue and/or EBITDA generation. Furthermore, a significantly lower production volume than expected and/or a significant drop in a coal price could also trigger a rating downgrade as these adversely affect the Company’s financial profile.
Established in February 1981, RICO was previously engaged in heavy equipment rental and spare parts supply. Since 2007, RICO has been operating fully as a coal mining contractor, with activities including overburden (OB) removal, coal hauling, and heavy equipment rental. It has been awarded mining contracts from companies, such as PT Berau Coal, PT Tambang Batu Bara Bukit Asam, and PT Mahakam Sumber Jaya. RICO is an indirect subsidiary of PT SMR Utama Tbk (SMRU) through PT Ricobana. As of September 30, 2019, its shareholders were PT Ricobana (99.99%) and Mr. Wijaya Mulia (0.01%). (ends)