Bangkok--24 Dec--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed Canadoil Asia Limited's (CASIA) National Short-term rating of its THB1.0bn short-term bills of exchange (B/E) programme at 'F3(tha)'. The maturity of each series of B/E will not exceed 270 days.
CASIA's creditworthiness is based on the company's strong presence in Asia via its parent group's long track record and global customer base. Despite commencing its operations in 2002, CASIA has established a strong reputation with major end-users in Asia for high quality standards, control and timely delivery. The company's cost competitiveness and limited exposure to the volatility of raw material prices, given the nature of its business, allows it to pass through incremental costs to end users.
Despite a weakening outlook in the oil & gas and petrochemicals sectors due to the sharp fall in global oil prices, CASIA should not be immediately impacted given its strong sales backlog of projects which are already awarded for engineering procurement & construction (EPC) contractors, helping to secure strong earnings growth in 2009. Continued low oil prices however, could result in some delays in the projects under initial stages of design and construction; although CASIA views that a sharp increase in demand from the water desalination and power projects should help support overall demand for pipe fitting over the medium-term.
Apart from its exposure to the cyclical petrochemicals and energy sectors, CASIA has foreign exchange exposure as all debt is denominated in THB, while most of its earnings are in foreign currencies, mainly USD. Related company exposure also poses some risk; CASIA may need to support related companies, which could materially affect its creditworthiness. In addition, a lower level of reporting and accounting requirements for private companies makes it more difficult to effectively monitor the company's performance.
CASIA continued to report strong earnings in 2007, due to strong top-line growth. EBITDAR increased by 38% yoy to THB561m in 2007. However, the company's financial leverage measured by adjusted net debt to EBITDAR ratio still remained relatively high at 4.1x at end-2007 (End-2006: 4.2x), given its substantial increase in working capital requirements. With expected EBITDAR growth in light of decreased capex and working capital requirement, CASIA's financial leverage is expected to improve to a more moderate level over the next 12-18 months. Meanwhile, its liquidity remains adequate, supported by its strong sales backlog and undrawn committed working capital facilities from local financial institutions of THB285m at end-H108.
Established in 1999, CASIA is a manufacturer of heavy-duty and large-diameter butt-weld pipe fittings, used mainly in the oil & gas, petrochemicals, power and civil engineering industries. The company also has value-added facilities, namely a pressure vessel and a pipe spooler, which are components in various industrial plants. CASIA is a member of Canadian-based Canadoil Group, one of the few major global providers of piping solutions with an extensive global sales network. The company operates as a production base and a distribution centre for Canadoil Group, with its main focus on the Asian market.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Contacts: Wasant Polcharoen, Lertchai Kochareonrattanakul, Vincent Milton, Bangkok, +662 655 4755.
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215,
Email: [email protected].
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.