Fitch affirms John Keells at 'AAA(lka)'
Fitch Ratings has affirmed John Keells Holdings PLC's (JKH) National
Long-Term rating at 'AAA(lka)'. The outlook is stable.
The affirmation reflects JKH's resilience of dividend inflows to, and
resultant low financial leverage (net debt/EBITDA excluding
non-recurring items) at the holding company (HoldCo).
This is in turn driven by the strong competitive positions of most of
its key operating companies.
Fitch also notes that the risk of structural subordination of HoldCo
creditors is low as JKH's key dividend-paying companies have minimal
debt on their balance sheets.
"JKH's track record of maintaining a conservative capital structure
at HoldCo by funding acquisitions and expansions largely via a
combination of pre-issued equity and retained earnings provides added
comfort to its rating" Hasira De Silva, Assistant Vice President at
Fitch Ratings Lanka Ltd said.
"The rating also reflects JKH's strong liquidity position,
well-spread-out debt maturities, and its exceptionally strong access to
local banks and capital markets" De Silva said.
Its capital structure is also supported by its broad ownership
profile, where the single-largest shareholder owned 21 percent at
end-March 2011 (FYE11).
In FY11, JKH's group revenue grew by 26 percent yoy to Rs 60.5bn,
while its EBITDA (excluding non-recurring items) grew by 51 percent yoy
to Rs 7.7bn, as most operating segments benefited from resurgence in
regional and local economic activities. At HoldCo, South Asia Gateway
Terminals (SAGT) - JKH's 42 percent-owned terminal operator at the Port
of Colombo (POC) - accounted for 59 percent of total dividends, while
its leisure and property segment and financial services contributed 20
percent and 10 percent, respectively.
Over the medium-term, JKH expects dividends from its leisure sector
to increase and account for a greater proportion of earnings at HoldCo.
Key among the medium-term risks is a new deep-water terminal at POC,
which will increase container-handling capacity and could dampen SAGT's
profitability and its capacity to upstream dividends.
However, Fitch expects this threat to be mitigated by the strong
growth in regional transshipment demand.
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