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The Pakistan Credit Rating Agency Limited

Date
17-Nov-2017
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Sehar Fatima
sehar.fatima@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 | Cement (Nov 17) [View]
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PACRA Maintains Entity Ratings of Bestway Cement Limited
 Rating Type Entity
Current
(17-Nov-2017)
Previous
(05-Apr-2017)
 Action Maintain Maintain
 Long Term AA- AA-
 Short Term A1+ A1+
 Outlook Stable Stable
 Rating Watch - -

Bestway Cement’s ratings reflect its market leading position in industry emanating from hitherto largest market share (18%). The company has history of successful mergers, further fortified by cost-efficient operational framework, robust EBITDA margins and strong profitability. The Company has lately announced capacity expansion (1.8mln tpa) – entirely financed through internal cashflows – which is likely to commence operations in 1QFY19. This will assist the Company in holding its market share amidst the industry wide significant expansion trend. In addition to strong local demand, the company’s business profile is further strengthened by an established dividend stream from its strategic investment - United Bank Limited (~8% stake) - augmenting its cashflows. The entity’s financial risk, mainly reflected from sturdy coverages and low leveraged capital structure, remains fairly low. The ratings derive benefit/comfort from (i) the company’s association with Bestway Group (UK) and (ii) strong local cement demand on the back of rising economic and infrastructure activity which is likely to prevail in upcoming years.

The ratings are dependent on upholding of the company’s business vis-à-vis financial risk profile. Any significant deterioration in the sector’s outlook particularly any unfavorable change in demand and expansion matrix, thereby exerting pressure on prices and margins, may negatively impact the ratings.

About the Entity
Bestway Cement, post merger of Pakcem, operates as the single largest cement manufacturer of the country with total cement capacity of ~8.6mln tons p.a. Bestway Cement, listed on PSX, is majority owned by Bestway Group (BWG) UK (76%), mainly through corporates (60%), followed by individuals (~16%). The Company's eight member board comprises mainly BWG nominees. Two directors are Bestway Cement's executives (including CEO) while six are non-executive directors including two independent members. The CEO, Mr. Zameer Mohammed Choudrey, is a Chartered Accountant, associated with the group since 1984. Mr. Choudrey, also serving as Group CEO, is supported by a team of experienced professionals.
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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