TRIS Rating Co., Ltd. has affirmed a "BBB+" rating to Regional Container Lines PLC (RCL) and a "BBB" rating to RCL's Bt2,500 million senior debentures (RCL096A). The ratings reflect RCL's strong market position among regional feeders in terms of size of fleet, frequency of service and age of ships. The ratings also take into consideration RCL's capable and experienced management team and the global trend toward increased container shipments. However, these strengths are partially offset by the cyclical, highly competitive environment and RCL's relatively high leverage, which is the nature of the capital intensive transportation business.
TRIS Rating reported that, according to studies conducted by Containerisation International, RCL is in the top 40 shipping operators in the world in terms of fleet size. The sizes of operators' fleets vary based on the number of owned and chartered vessels operated. With a total fleet capacity of approximately 35,000 TEUs (twenty foot-equivalent unit), RCL owns 23 vessels and charters 13 vessels, giving it one of the largest container fleets in Southeast Asia. According to the Port of Singapore Authority and RCL's local agencies' statistics, RCL has the highest feeder market share between Singapore, the Philippines, Malaysia, and Thailand. RCL is also the second largest player in Indonesia. RCL's large market share stems from its high frequency of ship services per week multiplied by huge fleet size.
TRIS Rating said that most of RCL's ships are self-owned, making for more flexible schedules and high frequency transportation service. Its competitors have smaller fleets with lower frequency, thereby giving RCL a competitive advantage. Most of RCL's vessels are young ships with an average age of 10 years, compared with fleets ranging in age from seven to 21 years for other publicly-traded Thai shipping operators. The company's capital expenditures to acquire new vessels is considered high, but new ships are generally more fuel-efficient and are likely to require less labor than older ships. Because of this huge investment in new ships, RCL's debt to capitalization during the last five years stayed in the range of 58%-72%. RCL's leverage during the coming two years is expected to be higher due to increased ship-building.
Furthermore, RCL's management team has extensive experience. Its Thai founder has been in the shipping business since 1973. Top management consists of both Thais and Singaporeans who have long experience with world-class ship operators. Other than the traditional Shipper-Owned-Containers (SOC) business, RCL has expanded into Carrier-Owned-Containers (COC). While SOC largely depends on the global economy and main line operator decisions, COC relies more on regional economic conditions and retail customers.
TRIS Rating said the container shipping industry is highly cyclical. Each cycle has traditionally spanned 5-6 years; however, in recent years, there has been a shortening of cycles. Freight rates are also volatile and it is not easy for operators to match construction of new ships to upticks in the container industry cycle. Demand for shipping is closely linked with economic activities and trade. The health of the global economy has a profound impact on the SOC business, whereas intra-Asia trade is a major factor in the COC business. According to the International Monetary Fund's World Economic Outlook, real world GDP grew 3.2% in 2003 and is projected to grow by 4.6% in 2004. GDP in developing Asia grew at 7.8% in 2003, and expected to be 7.4% in 2004. In 2003, world trade grew around 5.2%, rising from 3.1% in 2002. The World Economic Outlook forecasts that world trade will grow by 7.1% in 2004 and by 6.7% in 2005. -- End Regional Container Lines PLC (RCL) Company Rating: Affirmed at BBB+ Issue Rating:RCL096A: Bt2,500 million senior debentures due 2009 Affirmed at BBB
TRIS Rating reported that, according to studies conducted by Containerisation International, RCL is in the top 40 shipping operators in the world in terms of fleet size. The sizes of operators' fleets vary based on the number of owned and chartered vessels operated. With a total fleet capacity of approximately 35,000 TEUs (twenty foot-equivalent unit), RCL owns 23 vessels and charters 13 vessels, giving it one of the largest container fleets in Southeast Asia. According to the Port of Singapore Authority and RCL's local agencies' statistics, RCL has the highest feeder market share between Singapore, the Philippines, Malaysia, and Thailand. RCL is also the second largest player in Indonesia. RCL's large market share stems from its high frequency of ship services per week multiplied by huge fleet size.
TRIS Rating said that most of RCL's ships are self-owned, making for more flexible schedules and high frequency transportation service. Its competitors have smaller fleets with lower frequency, thereby giving RCL a competitive advantage. Most of RCL's vessels are young ships with an average age of 10 years, compared with fleets ranging in age from seven to 21 years for other publicly-traded Thai shipping operators. The company's capital expenditures to acquire new vessels is considered high, but new ships are generally more fuel-efficient and are likely to require less labor than older ships. Because of this huge investment in new ships, RCL's debt to capitalization during the last five years stayed in the range of 58%-72%. RCL's leverage during the coming two years is expected to be higher due to increased ship-building.
Furthermore, RCL's management team has extensive experience. Its Thai founder has been in the shipping business since 1973. Top management consists of both Thais and Singaporeans who have long experience with world-class ship operators. Other than the traditional Shipper-Owned-Containers (SOC) business, RCL has expanded into Carrier-Owned-Containers (COC). While SOC largely depends on the global economy and main line operator decisions, COC relies more on regional economic conditions and retail customers.
TRIS Rating said the container shipping industry is highly cyclical. Each cycle has traditionally spanned 5-6 years; however, in recent years, there has been a shortening of cycles. Freight rates are also volatile and it is not easy for operators to match construction of new ships to upticks in the container industry cycle. Demand for shipping is closely linked with economic activities and trade. The health of the global economy has a profound impact on the SOC business, whereas intra-Asia trade is a major factor in the COC business. According to the International Monetary Fund's World Economic Outlook, real world GDP grew 3.2% in 2003 and is projected to grow by 4.6% in 2004. GDP in developing Asia grew at 7.8% in 2003, and expected to be 7.4% in 2004. In 2003, world trade grew around 5.2%, rising from 3.1% in 2002. The World Economic Outlook forecasts that world trade will grow by 7.1% in 2004 and by 6.7% in 2005. -- End Regional Container Lines PLC (RCL) Company Rating: Affirmed at BBB+ Issue Rating:RCL096A: Bt2,500 million senior debentures due 2009 Affirmed at BBB