TRIS Rating Co., Ltd. has affirmed the company rating of Regional Container Lines PLC (RCL) at
“A-” and has also affirmed the rating of RCL’s senior debentures (RCL096A) at “BBB+”. The outlook remains “stable”. The ratings reflect RCL’s strong market position among regional feeders, which is the result of its fleet size, frequency of service, and the young age of its ships. The ratings also take into consideration RCL’s capable and experienced management team and the global trend toward increased use of container shipments. However, these strengths are partially offset by the cyclical, highly competitive business environment and rising high fuel prices.
The “stable” outlook is based on the expectation of RCL’s ability to sustain its strong market position and maintain its financial status at an acceptable level during an industry downtrend. The outlook also reflects the management team’s discipline in utilizing the cash flow generated by operations to fund an expansion plan and dividend payments, rather than relying mostly on debt financing.
TRIS Rating reported that RCL is the largest feeder operator among ASEAN shippers. According to the Port of Singapore Authority (PSA) and RCL’s local agencies’ statistics, the company has the highest feeder market share between Singapore, the Philippines, Malaysia, and Thailand. RCL’s large market share stems from the high number of trips it operates per week multiplied by its huge fleet size. RCL is also one of the top 30 container shippers in the world based on fleet size. Currently, the company has a total capacity of 49,758 TEUs (twenty foot-equivalent unit), from 32 vessels of its own and nine charter vessels. As it owns most of its vessels, RCL can offer frequent voyages and operate on flexible schedules. While its competitors operate smaller fleets, RCL’s larger fleet size provides a competitive advantage through greater frequency of service. In addition, most of RCL’s fleet is young at an average age of 10 years. Therefore, the company has benefited from more efficient use of fuel and lower maintenance expense.
TRIS Rating said, the container shipping industry is highly cyclical. Each cycle has a traditional span of 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 capture uptrends in the container
shipping industry cycle. Demand for shipping is closely linked to economic activities and trade. The health of the global economy has a profound impact on the liner business, whereas intra-Asia trade is a
major factor in the feeder business.
The shipping freight rate rose considerably during 2004-2005. However, the cycle has started to slowdown in 2006 but is expected to recur in 2008. RCL’s operating margin dropped in 2006 because freight rates fell while bunker oil cost soared. RCL’s total debt to capitalization ratio (unadjusted for short-term operating leases) stayed at 34.5% at the end of June 2007. The company’s financial performance in the first half of 2007 was weaker than the same period of last year. Freight revenue declined from Bt9,999 million in the first half of 2006 to Bt 9,643 million in the same period of 2007 while operating margin declined from 19.4% in the first half of 2006 to 18.7% in the first half of 2007. -- End
Regional Container Lines PLC (RCL)
Company Rating: Affirmed at A-
Issue Rating:
RCL096A: Bt2,500 million senior debentures due 2009 Affirmed at BBB+
Rating Outlook: Stable
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Copyright 2007, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.
“A-” and has also affirmed the rating of RCL’s senior debentures (RCL096A) at “BBB+”. The outlook remains “stable”. The ratings reflect RCL’s strong market position among regional feeders, which is the result of its fleet size, frequency of service, and the young age of its ships. The ratings also take into consideration RCL’s capable and experienced management team and the global trend toward increased use of container shipments. However, these strengths are partially offset by the cyclical, highly competitive business environment and rising high fuel prices.
The “stable” outlook is based on the expectation of RCL’s ability to sustain its strong market position and maintain its financial status at an acceptable level during an industry downtrend. The outlook also reflects the management team’s discipline in utilizing the cash flow generated by operations to fund an expansion plan and dividend payments, rather than relying mostly on debt financing.
TRIS Rating reported that RCL is the largest feeder operator among ASEAN shippers. According to the Port of Singapore Authority (PSA) and RCL’s local agencies’ statistics, the company has the highest feeder market share between Singapore, the Philippines, Malaysia, and Thailand. RCL’s large market share stems from the high number of trips it operates per week multiplied by its huge fleet size. RCL is also one of the top 30 container shippers in the world based on fleet size. Currently, the company has a total capacity of 49,758 TEUs (twenty foot-equivalent unit), from 32 vessels of its own and nine charter vessels. As it owns most of its vessels, RCL can offer frequent voyages and operate on flexible schedules. While its competitors operate smaller fleets, RCL’s larger fleet size provides a competitive advantage through greater frequency of service. In addition, most of RCL’s fleet is young at an average age of 10 years. Therefore, the company has benefited from more efficient use of fuel and lower maintenance expense.
TRIS Rating said, the container shipping industry is highly cyclical. Each cycle has a traditional span of 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 capture uptrends in the container
shipping industry cycle. Demand for shipping is closely linked to economic activities and trade. The health of the global economy has a profound impact on the liner business, whereas intra-Asia trade is a
major factor in the feeder business.
The shipping freight rate rose considerably during 2004-2005. However, the cycle has started to slowdown in 2006 but is expected to recur in 2008. RCL’s operating margin dropped in 2006 because freight rates fell while bunker oil cost soared. RCL’s total debt to capitalization ratio (unadjusted for short-term operating leases) stayed at 34.5% at the end of June 2007. The company’s financial performance in the first half of 2007 was weaker than the same period of last year. Freight revenue declined from Bt9,999 million in the first half of 2006 to Bt 9,643 million in the same period of 2007 while operating margin declined from 19.4% in the first half of 2006 to 18.7% in the first half of 2007. -- End
Regional Container Lines PLC (RCL)
Company Rating: Affirmed at A-
Issue Rating:
RCL096A: Bt2,500 million senior debentures due 2009 Affirmed at BBB+
Rating Outlook: Stable
----------------------------------------------------------
Copyright 2007, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.