Bangkok--12 Dec--Fitch Ratings (Thailand)
Fitch Ratings-Bangkok/Singapore-12 December 2006: Fitch Ratings (Thailand) Limited has today affirmed Thailand’s Bangkok Aviation Fuel Services Public Company Limited’s (“BAFS”) senior unsecured Long- and Short-term National ratings of ‘A-(tha)’ (A minus(tha)) and ‘F2(tha)’, respectively. The Outlook on the ratings is Stable.
The ratings are based on BAFS’s still dominant position after the opening of the new international airport, Suvarnabhumi Airport (“SA”), on 28 September 2006. Despite a new into-plane service operator, BAFS is the only fully-integrated fuel service provider at SA and has a 90% market share for into-plane services. The ratings are also supported by BAFS’s major shareholders being key users of aviation fuel services, good track record of its senior management, as well as the company’s strong and stable cash flow generating capability. A substantial increase in the new airport’s capacity, coupled with a doubling in its fuel services fees at SA, should provide BAFS with a strong earnings growth in the medium term.
On the other hand, the ratings take into account BAFS’s high financial leverage, largely as a result of the new investment at SA. BAFS’s net debt to annualised EBITDA ratio continued to weaken to 4.9x at the end of the first nine months of 2006 (“9M06”) from 4.6x at end-2005 and 2.6x at end-2004. Adjusted for rental fee, net adjusted debt to annualised EBITDAR ratio also weakened to 5.2x at end-9M06 (end-2005; 4.9x and end-2004; 3.4x). BAFS’s net debt to EBITDA is expected to peak at around 5.0x this year, although projected stronger EBITDA growth and a more moderate capital spending should help improve its financial leverage to a range of 2.5x to 3.0x in 2007 and 2008. Meanwhile, BAFS’s liquidity remains manageable, supported by a cash balance of THB294 million at end-9M06 and the current low level of short-term debt (about 5% of total debt portfolio at end-9M06).
BAFS is also exposed to the current THB appreciation which has affected its USD-linked revenue for 9M06, although this risk is partly mitigated by the purchase of forward contracts. Other operational concerns include the potential new depot operator at SA which may moderately increase price competition in the medium term, as well as the current low utilisation of jet fuel transport pipeline, operated by BAFS’s 50%-owned joint-venture, namely JP-One Asset Company Limited (“JP-One”), due to heavy price competition by the other operator. In addition, the effect of high oil prices could affect the airline industry, leading to lower fuel service volume and earnings for BAFS.
The Stable Outlook is based on BAFS’s strong earnings growth outlook and its future substantial reduction in capital investments should help improve its financial leverage to be more consistent with the current rating level by 2008.
Established in 1983, BAFS is now the dominant aviation fuel service provider at SA, as well as Bangkok International Airport and other two provincial airports. At SA, BAFS operates the main depot, the hydrant pipeline and the into-plane services. Through JP-One, BAFS owns one of the two jet fuel transport pipelines for the new airport. BAFS’s largest shareholders are Thai Airways International Plc with a 22.6% stake, while other shareholders are Airports of Thailand Plc, PTT Plc (rated ‘AA+(tha)’/Positive) and other foreign oil companies, holding another c.47%.
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: Wasant Polcharoen, Soamsiri Chadavadh, Vincent Milton; Bangkok, Tel: +662 655 4755
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com . Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.