TRIS Rating Co., Ltd. has assigned the company rating of Univentures PLC (UV) at "BBB" with "stable" outlook. The rating reflects the company's strong balance sheet, management's ability to successfully invest in property development projects and its leading position in zinc oxide (ZnO) business. These strengths are partially offset by the volatile ZnO industry, the potential scarcity of local raw material and unstable cash flow generation from the company's investment business due to a lack of diversity in its investment portfolio.
While the "stable" outlook reflects TRIS Rating's expectation that UV will be able to maintain its leading position in ZnO industry and will be able to complete its investment projects on schedule. UV is expected to maintain its conservative financial policy and should be able to regularly deliver feasible investment projects.
TRIS Rating reported that UV has been in the ZnO business since 1980 and has become the largest domestic producer. As ZnO is a commodity, which by its nature means it is subject to price competition, despite strong domestic demand, UV's operating margin fluctuates from year to year. Zinc is the key raw material of ZnO. Due to limited domestic zinc reserves, UV cannot rely on sourcing domestically and will need to substantially increase raw material imports in the future, which impact on UV's business. This situation will require close monitoring. Despite volatile pricing, ZnO demand has exhibited double-digit annual growth during the last three years.
TRIS Rating said, the business scope of UV actively expanded with the investment business in 2000. During the last four years, the company invested in several property projects, mainly through joint ventures (JVs) with selective developers. UV utilizes its expertise to acquire distressed assets at an attractive cost and is responsible for all financial matters of the JV projects, while the developer-partners are in charge of development and sales. Hence, UV has a high degree of reliance on its developer-partners to complete the projects. Although, UV's investment in property projects has generated revenue since 2002, the property projects have not yet provided stable cash flow, and most of them will be recognized under the equity method. These investments were funded mainly by equity and a small portion of debt. As a result, the company has low leverage and minimal interest expense burden. UV's balance sheet has been very strong, mainly as a result of its low leverage. Total debt to capitalization, although increasing, was at strong levels of 2%-15% during the last five years, and stood at 18% at the end of June 2005.
UV's internal cash generation has been quite volatile. Funds from operations (FFO) were as low as Bt11 million in 2000, while the peak was at Bt74 million in 2004, including a Bt73.5 million dividend from one of its JVs, Sansiri Venture Co., Ltd. The company needs time to build up its portfolio to ensure a stable stream of cash flow from diverse projects, TRIS Rating said. -- End
Univentures PLC (UV) Company Rating: BBB Rating Outlook: Stable
While the "stable" outlook reflects TRIS Rating's expectation that UV will be able to maintain its leading position in ZnO industry and will be able to complete its investment projects on schedule. UV is expected to maintain its conservative financial policy and should be able to regularly deliver feasible investment projects.
TRIS Rating reported that UV has been in the ZnO business since 1980 and has become the largest domestic producer. As ZnO is a commodity, which by its nature means it is subject to price competition, despite strong domestic demand, UV's operating margin fluctuates from year to year. Zinc is the key raw material of ZnO. Due to limited domestic zinc reserves, UV cannot rely on sourcing domestically and will need to substantially increase raw material imports in the future, which impact on UV's business. This situation will require close monitoring. Despite volatile pricing, ZnO demand has exhibited double-digit annual growth during the last three years.
TRIS Rating said, the business scope of UV actively expanded with the investment business in 2000. During the last four years, the company invested in several property projects, mainly through joint ventures (JVs) with selective developers. UV utilizes its expertise to acquire distressed assets at an attractive cost and is responsible for all financial matters of the JV projects, while the developer-partners are in charge of development and sales. Hence, UV has a high degree of reliance on its developer-partners to complete the projects. Although, UV's investment in property projects has generated revenue since 2002, the property projects have not yet provided stable cash flow, and most of them will be recognized under the equity method. These investments were funded mainly by equity and a small portion of debt. As a result, the company has low leverage and minimal interest expense burden. UV's balance sheet has been very strong, mainly as a result of its low leverage. Total debt to capitalization, although increasing, was at strong levels of 2%-15% during the last five years, and stood at 18% at the end of June 2005.
UV's internal cash generation has been quite volatile. Funds from operations (FFO) were as low as Bt11 million in 2000, while the peak was at Bt74 million in 2004, including a Bt73.5 million dividend from one of its JVs, Sansiri Venture Co., Ltd. The company needs time to build up its portfolio to ensure a stable stream of cash flow from diverse projects, TRIS Rating said. -- End
Univentures PLC (UV) Company Rating: BBB Rating Outlook: Stable