Bangkok--23 Feb--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed Bangkok Aviation Fuel Services Public Company Limited's (BAFS) National Long-term rating at 'A-(tha)' (A minus(tha)) and National Short-term rating at 'F2(tha)'. The Outlook is Stable. The ratings reflect BAFS' position as the sole operator of the fuel depot and hydrant network and as the major into-plane fueling service provider with a 90% market share at Thailand's Suvarnabhumi Airport (SA). The company is also the sole aviation fuel service provider at the Bangkok International Airport (BIA). The ratings are underpinned by BAFS' major shareholders being key users of aviation fuel services, its fee structure which limits exposure to volatile oil prices, as well as management's strong track record. The ratings are also supported by BAFS' strong and stable cash flows in 2008, despite a weakening operating environment (including the 10-day closure of SA in Q408).
BAFS' earnings performance significantly improved after SA commenced operations in late 2006, while its financial leverage as measured by adjusted net debt to EBITDAR ratio continued to improve to 2.6x at end-2007 from 4.4x at end-2006. Its performance in 2008, however, weakened with a 6% decrease in uplift volume and 10% lower EBITDAR as a result of the impact from the global economic recession on air travel and airline business, as well as the impact of the 10-day SA closure from late November to early December 2008 due to local political tension. BAFS' cash flow from operations, nevertheless, remained strong at about THB851m in 2008 while its financial leverage increased only slightly to 2.8x at end-2008, given more moderate capital expenditures.
The ratings also take into account the continuing deterioration in the global economic environment in 2009 which will inevitably affect air traffic which will in turn impact BAFS' uplift volume. Despite the weakening uplift volume trend, BAFS's moderate investment plan should allow the company to generate positive free cash flows during 2009-2011. Adjusted net debt to EBITDAR ratios are, therefore, expected to gradually improve to the range of 2.3x-2.8x over the next 12-18 months. Meanwhile, BAFS' liquidity remains strong, supported by its cash on hand of THB450m at end-2008 and its strong cash flow generation.
The Stable Outlook is based on Fitch's expectation that BAFS' dominant market position with strong cash flow generation and a more moderate capital expenditure should help maintain its financial leverage consistent with the current credit metric.
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: Somruedee Chaiworarat, Wasant Polcharoen, Vincent Milton, Bangkok, +662 655 4755.
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