Lahore, February 28, 2019 (PPI-OT): The ratings reflect BE Energy Limited association with a strong sponsor – Saudi based Bakri Group. Over the years, BE Energy has managed to gain ~3% market share and has ~320 retail outlets. BE Energy capitalizes on second largest oil storage infrastructure of over 180, 000 MTs spread across three terminals located at Port Qasim, Machike, Shikarpur, and one depot at Daulatpur. This has brought forth hospitality income for the company, which currently contributes sizeable chunk to the profitability. The company’s significant ongoing and expected investment in infrastructure (storage, supply chain, and retail outlets) will facilitate sustainable growth.
The company has witnessed stable growth in revenues and also manages to diversify its product mix (HSD: PMG: FO -43%: 38%: 19%). It has been successful in managing the impact of the reduction in demand for FO. BE Energy plans to focus on retail clients and enhance its supply chain infrastructure. To nurture its retail penetration the company is 1) rebranding its outlets on modern lines in a phased manner, 2) open new outlets along CPEC route and in the central parts of the country (mainly Punjab) where it has currently, low share, and 3) laying down supportive storage capabilities to ensure timely availability of its products.
The rating is supported by a strong management structure reflected by three management committees in place to efficiently procure and deliver the product. BE Energy has healthy financial risk profile with strong coverage indicators and low leveraging. The company has a leveraged capital structure which mainly encompasses short-term borrowings whose needs emanate from working capital management. Given its plans, long-term debt may also increase but moderately.
In addition to the timely development of infrastructure and supply chain, the ratings are dependent on BE Energy’s ability to build broad-based market penetration. The company needs to strengthen its relative positioning. Additionally, with the new debt to be acquired, the sustainability of coverages would remain important for the ratings.
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Analyst
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