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The Pakistan Credit Rating Agency Limited
Press Release

Date
26-Dec-17

Analyst
Ahmed Sheikh
ahmed.sheikh@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Ratings to Bakri Energy Limited

Rating Type Entity
Current
(15-Feb-18)
Action Initial
Long Term A+
Short Term A1+
Outlook Stable
Rating Watch -

The ratings reflect Bakri Energy's association with a strong sponsor - Saudi based Bakri Group. The company has a growing presence in competitive oil marketing industry. Over the years, Bakri Energy has managed to gain 3% market share and has 300 retail outlets. Bakri Energy capitalizes on second largest oil storage infrastructure of over 180,825 MTs spread across three terminals at Port Qasim, Machike and Shikarpur. The company’s significant ongoing and expected investment in infrastructure (storage, supply chain, and retail outlets) will facilitate sustainable growth. The company has witnessed stable growth in revenues where one-third of the revenue is generated from sales of Furnace Oil. Due to lower consumption of Furnace Oil in the country, the management intends to diversify the revenue stream and improve earnings: Bakri Energy plans to focus on retail clients and enhance its supply chain infrastructure by setting-up its own supply chain company.To nurture its retail penetration the company is 1) rebranding its outlets on model lines in a phased manner, 2) open new outlets along CPEC route and in the central parts of the country (mainly Punjab) where it has currently, low share, and 3) laying down supportive storage capabilities to ensure timely availability of its products. The rating is supported by strong management structure reflected by three management committees in place to efficiently procure and deliver the product. In order to support expansion, the company would be using a combination of debt and initial public offering proceeds. Bakri Energy has healthy financial risk profile with strong coverage indicators and low leveraging. Currently, the company has no long-term debt whereas short-term borrowing needs emanate from working capital management. Given its plans, the debt level would go up but moderately.

In addition to the timely development of infrastructure and supply chain, the ratings are dependent on Bakri Energy's ability to build broad-based market penetration. This should help to minimize the impact of constrained demand of FO.

About the Entity
Bakri Energy Limited incorporated in Pakistan commenced its operations in 2007. Bakri Energy Limited is owned by Rawafid Investment LLC based in UAE its shareholding lies with investment lies with members of Bakri family. Bakri group was founded in late 60's, the group provides aviation fuel services, shipping, time charter services, shipping management & marine support services in the middle east. Primarily, Bakri Energy is engaged in the procurement, storage, distribution, marketing and import of petroleum products and lubricants. With a network of 300 retail outlets and ~3% market share end (FY17) Bakri Energy was the 7th largest Oil Marketing Company (OMC). Bakri Energy has 2nd largest oil storage infrastructure of over 180,825 MTs facilitated by three terminals at Port Qasim, Machike and Shikarpur.

The board of Bakri Energy comprises four experienced professionals. Two members are from Bakri family while others are group executives. Both of the sponsor directors are actively involved in the oversight of the company. Mr Hussain Al Shammaa is the CEO of the company. He has been involved in the oil business since last 35 years. He was previously with Kuwait Petroleum Company (KPC). He is well renowned in the oil industry of Pakistan. The company has initiated plans to enhance its board to seven members while also adding independent directors.

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.