The Pakistan Credit Rating Agency Limited
28-Jun-19
Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
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PACRA Maintains Entity Ratings of Motorway Operations and Rehabilitation Engineering (Private) Limited (MORE)
| Rating Type | Entity | |
|
Current (28-Jun-19 ) |
Previous (27-Dec-18 ) |
|
| Action | Maintain | Maintain |
| Long Term | AA- | AA- |
| Short Term | A1 | A1 |
| Outlook | Positive | Stable |
| 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. The business profile of the company continued to remain good due to 1) revenues emanating from good traffic volume, 2) toll revenues subject to annual rate increase guaranteed by NHA, 3) income from ancillary services. The growth in traffic volume was higher in initial years of operational phase. Establishment of separate toll plazas and major rehabilitation work has been completed. Payments to NHA, as per the agreement, are being done through cashflows emanating from business. The financial risk profile is expected to be managed with net cumulative cashflows providing adequate service coverage. Increasing interest rate environment and stepped up principal repayments in upcoming years are key factors that may impact financial risk profile. The ratings recognize and incorporates strong financial muscle of sponsor.
Positive outlook captures the sustained improvement in the liquidity of the company, continuity of the same will be considered positive. Meanwhile, any material reduction in traffic volumes thereby impacting overall revenues and related cashflows will have negative rating implication.
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; one serving and two retired army officers (one engineer) and one civilian (finance professional). All board members are senior executives of FWO. The Director General FWO – Major General Inam Haider – also designated as Chairman MORE, supervises all FWO projects. The CEO, Brig. Shamim Akram (Retd.), 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.