TRIS Rating Co., Ltd. has upgraded the rating of Loxley PLC (LOXLEY) and the ratings of its Bt2,000 million senior debentures (LOXL06NA and LOXL08NA) to "BBB+" from "BBB". The rating upgrades are supported by LOXLEY's significantly improved financial position, which is due to its improving capital structure, a sharp reduction in interest expenses, and a substantial improvement in funds from operations. LOXLEY, a well-known local conglomerate, has an experienced and capable management in place, which has enabled the company to take strong positions in various businesses in the technology and trading sectors. However, these strengths are partially offset by its relatively low profit margins, especially in its trading business, and the volatility of the revenue stream from government project-based business. While the "stable" outlook reflects the ability of LOXLEY to generate earnings from diverse sources of business. Substantial cash on hand and a strong relationship with world-class technology firms will enable LOXLEY to bid for a substantial number of large projects over the next three to five years.
TRIS Rating reported that LOXLEY's cash flow protection improved substantially in 2003 as a result of its better operating performance, as illustrated by funds from operations (FFO) (including cash dividends received from its investments), which increased from Bt179 million in 2002 to Bt597 million in 2003. As a result, the FFO to total debt ratio almost tripled, from 5.7% in 2002 to 16.8% in 2003. Moreover, its EBITDA interest coverage ratio increased from 2.2 times in 2002 to 4.5 times in 2003, due to reduced interest expenses resulting from the refinancing of the existing loan with debentures. Furthermore, LOXLEY's liquidity and financial flexibility are enhanced by the Loxbit group's 14% holding in CS Loxinfo PLC (CSL), which had a market value of Bt768 million at the end of June 2004. LOXLEY currently holds 79% in the Loxbit group.
TRIS Rating said LOXLEY is an operating holding company with two principal business groups: Technology and Trading. Its technology business is classified into five major segments: information technology, infrastructure, telecommunications, consumer electronics and printing. Its major trading activities involve chemicals, consumer products and construction materials. More than 60 years old, LOXLEY has established long-lasting relationships with clients and suppliers. The main strength of LOXLEY stems from the expertise and experience of its management and personnel, which provide quality products and services in the diverse collection of industries where LOXLEY competes. All of these are major factors which enhance the company's ability to win projects that are up for bid.
LOXLEY's customers are primarily government agencies and large private-sector companies. The main portion of its government projects comes through competitive bidding; therefore, cash flow from operations partly depends on LOXLEY's bidding ability to successfully bid for and manage these projects. Its recurring revenue, which is derived from its trading business, consumer electronics, and service revenue from after-sale maintenance of turnkey project, has improved since 2001. Recurring revenue increased from Bt4,476 million in 2000 to Bt1,596 million only during the first quarter of 2004. Recurring revenue accounted for 60% of total revenue in 2003. However, the operating margin from these sources was relatively low because of intense competition.
Previously,LOXLEY serviced its debt by using cash flow generated from divestment of non-core businesses. During the last five years, its main cash flow came largely from fees, other revenues, and dividends from its investments. LOXLEY receives a continuing stream of dividends from its long-term investment such as Aspac Oil (Thailand) Co., Ltd., BHP Steel Lysagt (Thailand) Co., Ltd., Thai Fiber Optic Co., Ltd., Loxley Trading Co., Ltd. and Lao Soft Drink Co., Ltd. The major cash dividend contributor, Aspac Oil (Thailand) Co., Ltd., which is a manufacturer and distributor of "Castrol" and "BP" lubricant in Thailand, generated Bt225.4 million in 2003. LOXLEY's leverage has steadily improved; its total debt to capitalization ratio declined from more than 100% in 2000 to the satisfactory level of 38%-39% in 2003-2004. The relatively strong capital structure is expected to continue and gradually improves as a result of substantial cash generation and its commitment to a conservative financial polic, TRIS Rating said.-- End
Loxley PLC (LOXLEY) Company Rating: Upgraded to BBB+ from BBB Issue Ratings: LOXL06NA: Bt1,000 million senior debentures due 2006 Upgraded to BBB+ from BBB LOXL08NA: Bt1,000 million senior debentures due 2008 Upgraded to BBB+ from BBB Rating Outlook: Stable
TRIS Rating reported that LOXLEY's cash flow protection improved substantially in 2003 as a result of its better operating performance, as illustrated by funds from operations (FFO) (including cash dividends received from its investments), which increased from Bt179 million in 2002 to Bt597 million in 2003. As a result, the FFO to total debt ratio almost tripled, from 5.7% in 2002 to 16.8% in 2003. Moreover, its EBITDA interest coverage ratio increased from 2.2 times in 2002 to 4.5 times in 2003, due to reduced interest expenses resulting from the refinancing of the existing loan with debentures. Furthermore, LOXLEY's liquidity and financial flexibility are enhanced by the Loxbit group's 14% holding in CS Loxinfo PLC (CSL), which had a market value of Bt768 million at the end of June 2004. LOXLEY currently holds 79% in the Loxbit group.
TRIS Rating said LOXLEY is an operating holding company with two principal business groups: Technology and Trading. Its technology business is classified into five major segments: information technology, infrastructure, telecommunications, consumer electronics and printing. Its major trading activities involve chemicals, consumer products and construction materials. More than 60 years old, LOXLEY has established long-lasting relationships with clients and suppliers. The main strength of LOXLEY stems from the expertise and experience of its management and personnel, which provide quality products and services in the diverse collection of industries where LOXLEY competes. All of these are major factors which enhance the company's ability to win projects that are up for bid.
LOXLEY's customers are primarily government agencies and large private-sector companies. The main portion of its government projects comes through competitive bidding; therefore, cash flow from operations partly depends on LOXLEY's bidding ability to successfully bid for and manage these projects. Its recurring revenue, which is derived from its trading business, consumer electronics, and service revenue from after-sale maintenance of turnkey project, has improved since 2001. Recurring revenue increased from Bt4,476 million in 2000 to Bt1,596 million only during the first quarter of 2004. Recurring revenue accounted for 60% of total revenue in 2003. However, the operating margin from these sources was relatively low because of intense competition.
Previously,LOXLEY serviced its debt by using cash flow generated from divestment of non-core businesses. During the last five years, its main cash flow came largely from fees, other revenues, and dividends from its investments. LOXLEY receives a continuing stream of dividends from its long-term investment such as Aspac Oil (Thailand) Co., Ltd., BHP Steel Lysagt (Thailand) Co., Ltd., Thai Fiber Optic Co., Ltd., Loxley Trading Co., Ltd. and Lao Soft Drink Co., Ltd. The major cash dividend contributor, Aspac Oil (Thailand) Co., Ltd., which is a manufacturer and distributor of "Castrol" and "BP" lubricant in Thailand, generated Bt225.4 million in 2003. LOXLEY's leverage has steadily improved; its total debt to capitalization ratio declined from more than 100% in 2000 to the satisfactory level of 38%-39% in 2003-2004. The relatively strong capital structure is expected to continue and gradually improves as a result of substantial cash generation and its commitment to a conservative financial polic, TRIS Rating said.-- End
Loxley PLC (LOXLEY) Company Rating: Upgraded to BBB+ from BBB Issue Ratings: LOXL06NA: Bt1,000 million senior debentures due 2006 Upgraded to BBB+ from BBB LOXL08NA: Bt1,000 million senior debentures due 2008 Upgraded to BBB+ from BBB Rating Outlook: Stable