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The Pakistan Credit Rating Agency Limited

Date
18-Aug-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Muhammad Hassan
muhammad.hassan@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Corporate Rating Methodology (Jul 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]

Related Research

  • Sector Study | Hotels & Retail Industry (Mar 17) [View]
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PACRA assigns Initial Entity Ratings to Pakistan Services Limited
 Rating Type Entity
Current
(18-Aug-2017)
 Action Initial
 Long Term A+
 Short Term A1
 Outlook Stable
 Rating Watch -

Pakistan Services Limited (PSL) is the owner and operator of Pearl Continental (PC) Hotels in Pakistan. PC is the premium five star hotel chain of the country. The rating reflects the leading position of the PC brand in the domestic market alongwith a diversified geographical presence of its hotels, providing competitive edge over other players. PSL currently has presence in six major cities. The rating incorporates association of PSL with Hashoo group – leader in the domestic hospitality market with over 2500 rooms in 20 properties. PSL has observed continuous growth in Occupancies and Average Daily Rates – facet of improved security situation and increased economic activity in the country. PC – Lahore is the biggest hotel with 600+ rooms contributing ~45% to the overall revenue stream. The profitability trend is observing improvement. The company currently has a low leveraged capital structure. Improving trend of cashflows resulted in sound coverages for PSL. Notably, the company has formulated a reasonable financial matrix capturing maximum debt and desired coverage levels.

In order to capitalize on the increasing demand in the hospitality sector, PSL targets sizeable investments in expansion and development of new properties in both high-end and mid-tier segments. The company plans to enter real estate housing and mega mall projects through its subsidiaries. The debt driven expansions would increase the company’s leveraging. Management of coverages amidst rising debt levels would remain crucial. Herein, compliance with finance framework is important. Timely completion of under construction properties improving the cashflow stream would provide support to the coverages.
About the Entity
Pakistan Services Limited was established in 1958 and it is quoted on Pakistan Stock Exchange. It owns and operates chain of hotels and resorts under the brand name Pearl Continental Hotels – largest hotel chain of the country with 1,526 rooms. Hashoo Group directly & through it affiliates has 89.15% control of the company. Hashoo group is one of the leading business conglomerate of Pakistan with significant presence in Hospitality, Oil & Gas and other sectors.

Pakistan Services Limited has a nine member BoD, out of which eight are nominated by Hashoo group and it has one independent member. Mr. Sadruddin Hashwani – founder of the Hashoo Group – chairs the board. He has experience of over 5 decades of managing different businesses. Mr. Murtaza Hashwani is the Chief Executive Officer of the company. He is assisted by an able team of experienced professionals. Each hotel has its own management team headed by General Manager who reports directly to the vice president operations.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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