Press Release

VIS reaffirms ratings of Javedan Corporation Limited
 

Karachi, December 21, 2020: 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 1 have also been reaffirmed at ‘AA-’ (Double A Minus). 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 entity 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’. The previous rating action was announced on August 27, 2019.

The assigned ratings to the Sukuk incorporate strong debt servicing ability and structural features of the Sukuk. The Sukuk has an issue size of Rs. 2,993m, the tenor is 8 years inclusive of a grace period of 2 years while profit payment on the same is 6 month KIBOR+175bps. JCL has launched a housing scheme by the name “Naya Nazimabad” (NN). Naya Nazimabad is situated at Manghopir, Karachi. It adjoins Nazimabad, North Nazimabad and North Karachi. 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 target market are middle and upper middle-class segments of the society. The project is bifurcated in three phases. Phase I comprises residential units spread over 500 acres of land (Block A, B, C, D, M, and N). At end-June 2020, infrastructure development works of Blocks A-D in Phase I have been completed and development work in Block M and on other projects is ongoing. The Covid-19 outbreak has impacted the launch of Phase 2 i.e. Naya Nazimabad Apartment Project; initially intended to be launched in March 2020, it has been rescheduled to 2021. However, the Company has met its obligations through internal resources or by taking advantage of facilities announced by State Bank of Pakistan (SBP).

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 takes 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. The incentives provided by the government for the construction sector both in terms of construction and concessionary credit for home purchases bode well for the company.

Financial risk profile is strong as evident from low leveraged capital structure, hidden reserves on balance sheet and adequate cash flow profile. Proceeds from sale of inventory in hand from Phase I have largely remained sufficient for meeting debt servicing, development costs and overheads. The Company has taken the benefit of “deferment of principal” policy announced by SBP. As a result, the Company has managed liquidity well in an overall stressed and liquidity stretched period. Launch of Phase II i.e. Commercial Project in 2021 will strengthen cash flows for future development work.

For further information on this rating announcement, please contact the undersigned (Ext: 306) or Mr. Muhammad Tabish (Ext: 205) at 021-35311861-71 or fax to 021-35311872-3.



Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (May 2019)
http://vis.com.pk/kc-meth.aspx

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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 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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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