Press Release

VIS reaffirms ratings of Javedan Corporation Limited
 

Karachi, August 27, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity rating of Javedan Corporation Limited (JCL) at ‘A+’/A-1 (Single A Plus/A-One). Ratings assigned to Sukuk have also been finalized at AA- (Double A Minus). The assigned ratings to the Sukuk incorporate strong debt servicing ability and structural features of the Sukuk. Long term entity rating of ‘A+’ denotes good credit quality and adequate protection factors; risk factors may vary with possible changes in the economy. The short term rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’.

JCL is in the process of development of housing scheme by the name of “Naya Nazimabad” (NN). The target market of NN are progressive middle and upper-middle class segment of the society. The project is spread over 1,366 acres of land and includes bungalows, open plots, flat/apartments and commercial sites, malls, shopping centers etc. The first phase of NN was launched in the year 2011 which was spread over 513 acres of land and subsequently launched 78 acres in 2015. Major portion of inventory of Phase-1 has been sold. Further limited portion of area in Phase II of the project were sold during 9MFY19. Going forward, the Company also plans to launch a portion of the Commercial Area during the first half of the ongoing fiscal year. The Commercial Area will have apartment/flat & commercial sites including retail markets.

The assigned ratings to JCL reflect moderate business risk, strong financial risk profile of the company and implicit support of the company’s majority shareholder, Arif Habib Group. Assessment of business risk profile take into account strong brand name developed over the years, within the city location of the project, security features and amenities on offer. Quality of amenities planned and in place is expected to bode well for future sales. Business risk profile draws support from the sizeable land bank available with the Company, which has significant value.

Financial risk profile is strong as evident from low leveraged capital structure, hidden reserves on balance sheet and adequate cash flow profile. Going forward, gearing and leverage levels is expected to improve due to higher projected profitability from upcoming project which will strengthen equity base while net debt repayments are projected to reduce outstanding debt. Besides launch of commercial area, sales of plots in phase-2 will constitute the bulk of the cash flows over the rating horizon. Materialization of projected cash flows remains dependent on timely launch of the commercial area and quantum of proceeds from sale of commercial sites. Timely completion of key milestone of the commercial project without any significant cost and time overruns while maintaining healthy sales velocity and collection efficiency, as projected, will remain critical to avoid cash flow mismatches and will be the key rating sensitivities going forward.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Mr. Talha Iqbal (Ext: 213) at 021-35311861-71 or fax to 021-35311872-3.




Javed Callea
Advisor

Applicable Rating Criteria: Industrial Corporates (May 2016)
http://www.vis.com.pk/docs/Corporate-Methodology-201605.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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