Analyst
Muhammad Harris Ghaffar
harris.ghaffar@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of Trans World Enterprise Services (Pvt.) Limited
Rating Type | Entity | |
Current (27-Jun-23 ) |
Previous (30-Jun-22 ) |
|
Action | Maintain | Initial |
Long Term | BBB | BBB |
Short Term | A2 | A2 |
Outlook | Stable | Stable |
Rating Watch | - | - |
Trans World Enterprise Services (Private) Limited (“the Company” or “TES”) ratings reflect an emerging business profile and strapping presence in the telecommunication industry. The core function of TES is to provide reliable internet connectivity services through a scalable FTTH (fiber to the home) network, True IPTV & Voice. TES is backed by Pakistan’s TIER-1 network operator Trans World Associate Limited (“TWA”) which is the parent company and possesses exclusive &consortium ownership of the submarine fiber optic cable networks system and is the leading connectivity provider for Pakistan and Afghanistan. Numerous companies exist in the FTTH market segment where strength is primarily derived by the owned and self-laid length of fiber optic cable networks. The service period is also a prerequisite for geographical penetration in the market. Assigned ratings take comfort from association with its parent company TWA. Currently, TES is expanding its operations in all three major cities of Pakistan, namely Lahore, Karachi & Islamabad. The Company has successfully laid almost 5,000 Kms fiber optic and additional 1,000 Kms is in progress. During CY22, the gross sales of the Company have shown a growth of 32.1% in comparison to the same corresponding period. This performance is primarily supplemented by two factors (i) a progressive approach regarding enhancement of the customer base & (ii) Optimal adjustment of the average selling price. The Company expects to sustain its growth trajectory in the (FTTH) by leveraging its enhanced area coverage for the acquisition of new customers. The Company manage 100% of its internet bandwidth requirement from TWA and bandwidth charges are directly pegged in USD which ultimately creates a gap in Sales and Cost of Sales as the selling price is PKR denominated. The non-transferability of PKR devaluation impacts on the end consumer is the foremost factor behind the lag in achieving break even during CY22 in terms of profitability. The BOD of holding company oversees the business and besides the quarterly board meetings, BOD members take monthly briefings on the financial performance and network expansion progress. A team of professionals and industry specialists augments the operations of the company. The company has implemented a robust internal control system across the organization, complemented by top-notch IT, business insight & intelligence, and financial reporting solutions. The financial risk profile of the Company is characterized by adequate coverages and cashflows. Capital structure is leveraged; encompassed by long-term borrowings and modest equity, however, during CY22 the parent Company injected equity of PKR 400mln in the form of right issue and conversion of PKR 605mln deposit for shares into paid-up capital to support the depleting equity levels on account of increase in accumulated losses.
The ratings are dependent upon improvements in revenue and profitability while retaining sufficient cashflows and coverages. However, adherence to maintaining its debt matrices at an adequate level is a precondition.
About
the Entity
TES was incorporated as a private limited company in Pakistan on 28 February 2011 under the Companies Ordinance, 1984. TES is a wholly-owned subsidiary of TWA. The Board consists of two directors and both are executive directors. Mr. Faisal Abbasi is the new CEO of the company & elevated in place of Mr. Kamran Malik (former president).