Aman Associates Limited (AAL) - Credit Rating Agency of Bangladesh

CRAB Ratings
Corporate
Credit Rating Report
Aman Associates Limited (AAL)
Rating
Long Term : BBB 3
Date of Rating : 06 January 2010
Validity Till : 31 December 2010
Analysts:
Razib Ahmed
Senior Financial Analyst
razib.ahmed@crab.com.bd
Nur Elahee Molla
Financial Analyst
nur_elahee@crab.com.bd
Mavin Ahmed
Financial Analyst
mavin@crab.com.bd
Financial Highlights
BDT in Million
2008-09 2007-08
Revenue 1,709.04 1,569.45
EBITDA 313.14 213.94
Net Worth 319.31 182.35
Gross Profit Margin 20.06% 14.10%
Bank Loans/Assets 82.27% 86.19%
EBITDA/Interest 1.78x 3.90x
Current Ratio 1.21x 1.15x
Debtors Days 53 04
Creditors Days 01 01
Inventory Days 386 188
01. RATIONALE
Credit Rating Agency of Bangladesh Ltd
(CRAB) has assigned BBB 3 (Triple B Three)
rating in the long term to Aman Associates
Ltd (AAL) based on audited financials of
2009 and other relevant information.
Corporate entities rated BBB in the long
term belong to ‘Adequate Capacity’ group.
Here corporate entities have adequate
capacity to meet its financial commitments
but more susceptible to adverse economic
conditions or changing circumstances and
also subject to moderate credit risk.
The rating reflects the Company’s strength
with its improving earnings and
profitability, satisfactory interest coverage,
large scale of business, diversified products
as well as group support. The rating also
considers the experience of the promoters,
there goodwill, and relatively satisfactory
credit history (according to Bankers
confidential Report). The rating however, is
constrained by business risk bear by
trading business. High leverage also brings
additional constrain for the Company.
AAL was incorporated in 2005 as a private
limited Company, is a concern of Aman
Group. The main business of AAL is import
business. The Company imported food
grain, fertilizer from abroad. The Company
sale the fertilizer through government
authorized distribution channel and sell
imported food grains (Lentil, wheat)
through own distribution channel. For that
purpose, AAL has 23 listed dealers all over
the country and 53 rented godowns in
Chittagong, Narayanganj and Jessore.
In FY 2008-09 AAL’s Gross Profit Margin
(20.06%) as well as Operating Profit
Margin (18.27%) was higher than the last
three years average. However, Net Profit
Margin of the Company continued its
diminishing trend started from FY 2006-07
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CRAB Ratings
Corporate
due to increasing financial expenses. As a result, ROA also shows declining trend
reaching 7.52% in FY 2008-09 from 24.30% in 2005-06 FY.
Due to nature of trading business, leverage position of AAL was very high. Company’s
liabilities to equity in FY 2008-09 were 4.70 times, which was 2.74 times in FY 2005-06
indicating that the Company offers very small equity cushion for its creditor/lender.
From the very first two years of operation, AAL’s coverage ratios were very high due to
no borrowed fund from outsider. However, when the firm start it’s funding from financial
institutions (2007-08 FY) because of increasing its business volume, its coverage ratios
sharply reduced. Such ratios are now at satisfactory level. EBITDA was 1.78 times of
interest expenses in FY 2008-09 suggesting the firm’s sufficient earnings to bear the
interest expenses.
Liquidity position of AAL was found to be reasonable. Cash and Bank balance of the
Company increased year by year. Current ratio of the Company was very high at the
initial stage of the businesses; which reduced to 1.21 times in FY 2008-09.
Working capital intensity of AAL had increased because of rising inventory and debtor
days as well as decline in creditor period. However, there was some improvement in
2007-08 with decline in debtor days as the Company improved its collection period.
AAL’s inventory days had raised sharply in 2008-09 because of inventory pile up due to
global recession and price fall of fertilizer. However, such tendency was started from FY
2007-08.
AAL has been banking with IBBL, Rajshahi Branch since January 2008. As per Bankers
Confidential Report from them, dealing with AAL and its sister concerns are found to be
satisfactory. Repayment behavior of AAL is found to be satisfactory and they timely
repaid the principal and profit amount of the investment. However, due to global
recession and fall in fertilizer price, AAL failed to adjust the liability in due time in this
year; but in the meantime, the accounts became rescheduled and running regularly. As
per Bank’s record during last one year, financial relationship with AAL’s suppliers and
customers was found to be good with no record of dishonoring of cheques due to
insufficient fund.
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