PEFINDO has affirmed its idA- ratings for PT Adhi Karya (Persero) Tbk (ADHI), its shelf-registered (SR) bond II, and SR bond III

(August 12, 2022)--PEFINDO has affirmed its idA- ratings for PT Adhi Karya (Persero) Tbk (ADHI), its shelf-registered (SR) bond II, and SR bond III. The outlook for the corporate rating is stable.

The rating reflects ADHI’s strong market position in the construction sector, its benefits as a state contractor, and its strong synergy with subsidiaries, contributing to its margin improvement. The rating, however, is constrained by its high leverage and weak cash flow protection measures, execution risks related to growing order book, and a volatile business environment in the construction sector.

The rating may be raised if ADHI manages to maintain its discipline approach towards investments backed by strong order book and successful execution on these order books along with improvements in credit metrics on a sustained basis. However, the rating may be lowered if ADHI incurs significantly more debt than projected owing to a more aggressive approach towards investments or a weaker-than-expected execution on its order books, resulting in elevated leverage and weakened interest coverage ratio on a sustained basis. We may also lower the rating if we believe ADHI’s access to funding deteriorates, which may impact its capacity to refinance upcoming debt maturities or service its debt.

ADHI, established in 1960, is a state-owned contractor company primarily engaged in providing construction services. Its business is classified into four main segments: construction; engineering, procurement, and construction (EPC); property and realty; and investment infrastructure. As of March 31, 2022, the Indonesian government holds 51% in ADHI and the remainder owned by the public. (ends)