The Pakistan Credit Rating Agency Limited
28-Dec-19
Analyst
Abdul Wahab
abdul.wahab@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-19
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-19
- Criteria | Rating Modifier | Jun-19
Related Research
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PACRA Upgrades Entity Ratings of Motorway Operations and Rehabilitation Engineering (Private) Limited (MORE)
| Rating Type | Entity | |
|
Current (28-Dec-19 ) |
Previous (28-Jun-19 ) |
|
| Action | Upgrade | Maintain |
| Long Term | AA | AA- |
| Short Term | A1+ | A1 |
| Outlook | Stable | Positive |
| Rating Watch | - | - |
MORE - a wholly owned subsidiary of Frontier Works Organization (FWO) - is specifically established for overlay and modernization of Lahore-Islamabad Motorway (M-2). The project is assigned by National Highway Authority on a Build-Operate-Transfer (BOT) basis for 20 years (beginning Apr-14). The construction phase comprised initial two years encompassing overlay and major rehabilitation work which was completed ahead of projected timeline in Aug-16. Lahore Islamabad motorway carries strategic importance as it adjoins two capitals. Over the last four operational years, MORE has witnessed consistent hike in traffic volumes and toll rates. Furthermore, rental from service areas are also providing support to profitability. Resultantly, Accumulated losses turned into Profits. The upgrade in rating reflects uplift in financial profile, standalone profitability, support from rentals and investment income. Payments to NHA, as per the agreement, are being done through cash flows emanating from business. The management is planning some staggering of payments therein. The financial risk matrix has witnessed significant improvement with reduced leveraging ( end June-16: 75%; end june-19: 68%); one third debt repaid. Pressure of robust liquidity on the balance sheet brings additional comfort.
The ratings recognize and incorporates strong financial muscle of sponsor and the explicit guarantee in place for debt repayments of MORE. Significant liquidity is lying on balance sheet, though net of relevant liabilities, is minuscule.
About
the Entity
Motorway Operations & Rehabilitation Engineering (Private) Limited (MORE) was incorporated on April 11, 2014. MORE’s Board of Directors consists of four FWO nominated members; two serving and two retired army officers are engineers. All board members are senior executives of FWO. The Director General FWO – Maj Gen Inam Haider Malik – also designated as Chairman MORE, supervises all FWO projects. The CEO, Brig. Atif Majeed, reports to the Chairman MORE, Commander FWO. Mr. Shaikh M. Khurshid Alam has been associated with the Company as Chief Financial Officer since Jan-17.