PEFINDO affirms PT Ricobana Abadi’s rating at “idBB+”

(December 15, 2020)--PEFINDO has affirmed its “idBB+” 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 idBB has a somewhat weak capacity to meet its long-term financial commitments relative to that of other Indonesian obligors. The obligor faces ongoing uncertainties or exposure to adverse business, financial or economic conditions which could result in an inadequate capacity on the part of the obligor to meet its financial commitments. The Plus (+) sign indicates that the rating is relatively strong within the respective rating category.

The corporate rating reflects RICO’s limited customer diversification, small market position in the coal mining contractor industry, and exposure to the fluctuation of coal prices. However, those concerns are partially offset by the Company’s experienced management team and adequately conservative business decisions.

The rating could be raised if RICO strengthens its market position in the coal mining contractor industry, as reflected by new contracts and a more diversified customer profile, which could significantly increase its revenue and reduce its dependency on certain customers.

This should also be supported by improvements in its profitability margins and financial profile, with a debt to EBITDA ratio of below 3.0x on a sustained basis. However, the rating could be lowered if the Company’s revenue and/or EBITDA over the near to medium term are significantly below our projections. We could also lower the rating if it aggressively finances its expansion with substantially larger debt than projected, without being compensated by stronger revenue and/or EBITDA generation.

Established in February 1981, RICO was previously engaged in heavy equipment rental and spare parts supply. Since 2007, it 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, 2020, its shareholders were PT Ricobana (99.99%) and Mr. Wijaya Mulia (0.01%). (ends)