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November 29, 2007 |
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CSM CORPORATAMA: Moody's Confirms Ba1.id Bond Ratings PT Moody's Indonesia has confirmed PT CSM Corporatama's national scale issuer and bond ratings of Ba1.id. The outlook for the ratings is stable. This concludes the review for possible downgrade initiated on October 30, 2007. "The confirmation follows the successful repayment of RENT's IDR100 billion bond due November 11, 2007, a development which has alleviated its immediate refinancing risk," says Joko Widodo, Moody's lead analyst for the company, adding, "The sources of the repayment mainly include bank facilities of IDR87.6 billion with the remainder from internal cash and proceeds from used car sales." "RENT's Ba1.id ratings continue to reflect the declining trend in its operating performance over recent years, a result of growing competition and the unavailability of cars for servicing due to a timing mismatch in its investment capex," says Widodo. "In addition, combined with the increase in debt-funded fleets and lower-than-expected car sales, the company's financial profile has weakened with interest cover low and EBIT coverage of around 1.0x," adds Widodo. Partially mitigating such concerns is the company's long-term contracts with corporate customers, including some well- established local as well as multinational companies. Furthermore, RENT has benefited from its strong relationship with its minority shareholder, Indomobil, one of the largest automotive distributors in the country and also one of the company's major car suppliers. A collaboration with Europcar also brings some advantages, such as an extensive sales network, skilled employees and integrated software. At the same time, RENT will be exposed to refinancing risk as its remaining IDR200 billion bonds will mature within the next 12 months. Given its declining operating profile and the uncertainty in financial markets, Moody's rating incorporates its concerns over RENT's ability to repay the maturing obligation on time. The stable outlook reflects Moody's expectation that RENT will maintain its established position in the car rental business and thus its current operating profile over the next 12-18 months. The ratings would be downgraded if RENT's operating profile continues to deteriorate. The key financial indicators for such a trend include: 1) EBITDA margin below 37-40%; and/or 2) a material increase in debt, such that EBITDA/Interest is lower than 1.0 -1.2x. Additionally, any unfavorable development in domestic financial markets that adversely affects RENT's ability to arrange refinancing for the maturing bonds would also pressure the ratings downwards. The ratings are unlikely to be upgraded in the near term, but in the longer term, upward pressure could emerge should RENT repay its maturing financial obligations and improve its operating profile. Such a situation would include improvements in key financial metrics, including Debt/EBITDA below 4.0x and EBIT/Interest above 1.2-1.5x on a sustained basis. Headquartered in Jakarta, PT CSM Corporatama's main businesses are car rentals, new & used car sales, and fuel & gas station services. RENT is 99.86% owned by PT Hamfred Pte Ltd Singapore with remaining shares of 0.07% held by PT Indomobil Sukses International Tbk (Indomobil) and PT Unicor Prima Motor. The company is also the holder of Europcar's exclusive network for Indonesia. |
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