Analyst
Silwat Malik
silwat.malik@pacra.com
+92-42-35869504
www.pacra.com
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Related Research
PACRA Maintains Rating of Dawood Hercules Corporation Limited | Sukuk II
Rating Type | Debt Instrument | |
Current (28-Jun-19 ) |
Previous (28-Dec-18 ) |
|
Action | Maintain | Maintain |
Long Term | AA | AA |
Short Term | - | - |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings reflect Dawood Hercules Corporation Limited's (DH Corp) strong profile as an InvestCo holding significant investments through it's subsidiary Engro Corp. Divestment in Hub Power Company Limited at healthy gains has led to accumulation of sizeable liquid funds. The Company continues to hold these funds in money market instruments and has recently started investing in blue chip market securities indicating very strong liquidity. DH Corp is exploring new investments avenues to add to its portfolio including those in the technology sector. Meanwhile, DH Corp is expected to have a steady and increasing dividend stream from it's subsidiary, Engro Corp, which has announced a new investment of up to PKR 7.5bln in the telecom sector in April'19 through Enfrashare, a wholly owned subsidiary of Engro Infiniti. Further, Engro Energy Limited have also announced significant investments in the energy sector. The business acumen of the sponsoring family and strong governance practices provide support to the ratings.
The ratings require upholding strong overall risk profile and prudent investment policy by the Company. DH Corp enjoys sizeable liquid funds from divestment in HUBCO, giving it ample liquidity and cushion for debt servicing. At the same time, the management's commitment to maintain existing debt levels and coverages would be critical.
About
the Entity
Dawood Hercules Corporation is a public listed company incorporated in 1968. The principal activity of the Company is to manage investments including its subsidiary and associated companies. Dawood Group (Dawood Family and associates) holds 34% stake in DH Corp through itsβ corporate entities (20%) and individuals (14%). Other related foreign companies hold 54% shareholding in DH Corp, 9% is held by corporate and financial institutions whereas around 3% is held by the general public. The BoD is chaired by Mr Hussain Dawood, the patriarch of Dawood family. Mr. Inam-Ur-Rehman, is serving as CEO since Dec β16.
About
the Instrument
DH Corp issued over the counter listed and secured Sukuk of PKR 5.2bln in Nov '17 to qualified institutional buyers through private placement. The Sukuk bears a profit of 3M Kibor + 1%, payable quarterly installments, in arrears. It has a tenor of 5 years. Principal will be re-paid in 8 semi-annual payments starting from 18th month from the issue date starting May '19. The instrument would fully mature in Nov '22.
DH Corp issued it's second Sukuk of PKR6 bln in Mar '18 to qualified institutional buyers through private placement. It is an over the counter listed and secured Sukuk bearing a profit of 3-M Kibor + 1% payable quarterly, in arrears. It has a tenor of 5 years. Principal will be re-paid in 8 semi-annual payments starting from 18th month from the issue date starting Sept β19. The instrument would fully mature in Feb β23.
The Sukuks have a low risk profile as it is secured through a charge on the shares of the companys core investment inclusive of 50% margin.