Philippine Rating Services Corp. (Philratings) maintained the top rating for the P30 billion worth of bonds of Gokongwei-led JG Summit Holdings Inc., citing its strong liquidity position and stable businesses, a statement showed.
Philratings said it had kept its PRS Aaa rating, which implies minimal credit risk, for the conglomerate’s debt. The rating, moreover, has a “stable” outlook, it added.
JG Summit is the holding firm for a group of companies with interests in foods, agro-industrial concerns and commodities; real estate and hotel; air transportation, and banking and petrochemicals.
“The rating reflects [JG Summit’s] strong liquidity, its sound capitalization, the solid market position of its core businesses, and the very good quality of its management. The rating also considers the continued positive prospects of the domestic economy,” Philratings said.
The agency cited JG Summit’s liquidity position, which it described as adequate with a current ratio of 1x as of end-September 2014, and which was an improvement from 0.7 times as of end-2013.
As of the end of September 2014, JG Summit had cash and cash equivalent of P32.5 billion, current available-for-sale investments of P10.4 billion, and financial assets at fair value through profit or loss of P17.3 billion, which when combined more than covered short-term debt (including current portion of long term debt) of P45.2 billion.
“Liquidity is expected to remain robust as operating cash will remain positive, and will be used to fund capital expenditures (capex) and loan repayments in 2015 and 2016. Reflecting the group’s expansion, capex will account for the bulk of project cash outflows,” Philratings said.
In addition to its internal cash generation, JG Summit has access to a variety of external funding sources.
Capital structure remained sound, with debt-to-equity (DE) ratio slightly rising to a still conservative 0.6x as of end-September 2014, attributable to a 32.7 percent hike in borrowings.
Long-term debt, including current portion, increased by 36 percent to P121.4 billion given the issuance of P30 billion in retail bonds by the parent company in February 2014.
PhilRatings noted that JG Summit’s debt levels “remained in compliance with the company’s internal debt-to-capital ratio ceiling of 2 times.” Miguel R. Camus