Karachi, February 19, 2018 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Joyland Limited (JL). Outlook on the assigned ratings is ‘Stable’. The ratings assigned to JL take into account its moderate business risk profile. While revenue remains highly sensitive to product / service and price elasticity, JL’s experience and expertise in amusement industry along with strategically chosen locations of facilities, largely mitigate the associated risk. Moreover, high business potential given very low penetration of amusement industry is also a key rating factor. However, the ratings remain sensitive to the anticipated benefits from upcoming projects for organic needs of the company and repayment of its financing liabilities in line with the timelines of their projects.
JL’s flagship amusement park facility currently contributes around two third of overall revenue. Sales have witnessed an increase in FY17 and subsequently mainly on account of higher revenue from flagship park and other locations, food business, consultancy and construction services. Gross margins increased during FY17 mainly on the back of expanding operations and increase in revenue from high margin consultancy services; resultantly net profit also increased in the outgoing year. Higher sales were reported in 1HFY18 that was mainly attributed to the new projects coming online along with steadily increasing revenue stream from the existing projects. The management expects further growth in revenues and stability in margins as the new projects will be coming online shortly.
The ratings also incorporate adequate financial risk profile emanating from low leveraged capital structure and sound coverages. Overall, the company maintains liquidity at comfortable levels with excess liquidity placed in money market mutual funds and stocks. The equity base of the company enhanced mainly on account of capital injection from sponsors.
While the company plans to procure a long-term loan for expansion project, gearing is projected to remain low given further equity injection and profit retention. With additional cash flows from upcoming projects, coverages are expected to remain strong. The company’s operations are primarily technology based; the management has embarked upon further automation to ensure smooth operations. Senior management team of the company comprises experienced resources in the relevant field. The corporate governance framework has room for improvement.
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