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The Pakistan Credit Rating Agency Limited

Date
29-Dec-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Muhammad Hassan
muhammad.hassan@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Corporate Rating Methodology (Jul 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]

Related Research

  • Sector Study | Shipping (Feb 17) [View]
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PACRA Maintains Entity Ratings of Pakistan National Shipping Corporation
 Rating Type Entity
Current
(29-Dec-2017)
Previous
(13-Feb-2017)
 Action Maintain Upgrade
 Long Term AA AA
 Short Term A1+ A1+
 Outlook Stable Stable
 Rating Watch - -

The ratings reflect PNSC's strong ownership - majority owned by Government of Pakistan - and its strategic significance as the country's flag carrier. On a stand-alone basis, PNSC’s business profile has gained significant strength in recent years as exhibited by continuous improvement in business margins on account of efficient fleet utilization, better pricing strategy, and cost management measures taken by the management. The company is currently catering increasing business volumes through chartered-hire vessels. Considering the volatility in margins, the company aims to increase its own fleet size by acquiring two vessels – Aframax and Long-range I. The expansion also includes acquisition of two ferries. These expansions are expected to result in improved revenue base and higher margins, in turn, further fortification in business profile of the company. The acquisition of new vessels would be majorly financed through debt; thus higher leveraging. This would burden the financial profile; however, improving cash flows from existing business coupled with expectation of additional high margin business to be catered by new vessels is likely to generate commensurate cashflows to support debt service coverages. This, along-with on-balance sheet liquidity, supports overall risk profile of the company. Government's decision to cut furnace oil imports can have seasonal impact on the company's revenues, though annual revenues are expected to remain intact.

The ratings are dependent on the Corporation's ability to generate envisaged cash flows post-expansion. Meanwhile, proactive management of financial profile while improving coverages remains important.
About the Entity
PNSC, majority (86.09%) owned by the Government of Pakistan (GoP) through Ministry of Ports and Shipping, functions as holding company with 19 wholly owned subsidiaries and an associate. PNSC, operating on a one-ship one-company model, is principally engaged in transportation of liquid cargo, slot chartering and bulk-cargo, catered through charter-hire arrangements and owned vessels. The Corporation is currently managing fleet of nine vessels, comprising five bulk carriers and four oil tankers with total carriage capacity of 681,806 DWT.

Mr. Rizwan Ahmed, the Chairman and CEO of PNSC, joined the Corporation in Dec17. He has worked on various key positions in the federal and provincial governments. He brings with him vast professional experience in administration, finances, management, human resource, law enforcement and public procurement. He is supported by a team of experienced individuals having long association with the Corporation.
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.
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