PT Serasi Autoraya picks PT Kresna Graha Sekurindo Tbk as a underwriter for medium term nottes of IDR400 billion. PT Pemeringkat Efek Indonesia assigned ratings for Serasi Autoraya and its proposed MTN of IDR400 billion at idA with a stable outlook.
The ratings reflect the company’s favorable fleet profile, strong market position in car rental business, sustainable revenue stream from rental business and relatively strong cash flow protection.
However, the ratings are constrained by the company’s customer concentration risk and high dependence on external funding to support the business growth. Serasi Autoraya is Indonesia’s biggest car and motorcycle rental company. The Company also engages in used car trading, taxi and shipping businesses. The Company has 17,385 units of cars and 3,199 units of motorcycles for rental service, 2 vessels for shipping service and 337 taxi units.
The Company is supported by 28 branches, 33 outlets and 526 workshops throughout Indonesia. The Company’s current shareholders are PT Astra International Tbk, or the Group (99.9995% shares ownership) and PT Arya Kharisma (0.0005%).
The Company’s favorable fleet profile is supported by a large fleet and variety in term of vehicle types and brands, which enables it to capture a wider business opportunity. At end of September 2009, the Company’s fleet for rental business consists of 17,385 units of cars and 3,199 units of motorcycles.
The average age of the fleets is also favorable with those of above 5 years numbering only 559 units, or 3.15% of total fleets. In terms of units, over 68% cars are Toyota and motorcycles are all Honda. These brands are recognized as having good service quality and high resale value. Strong market position in car rental business. With a combination of favorable fleet profile, strong brand image and extensive network coverage Serasi Autoraya can maintain a strong market position in car rental business.
Using the brand TRAC (Toyota Rent a Car), Serasi Autoraya is the only car rental operator that can offer a one stop solution for transportation services. In addition, the company’s involvement in used car trading through mobil88 and i-bid have enabled the company to achieve synergy in terms of its disposal activity, which is an important factor in rental business. As a result of its strong business position, in 3Q09 the company was able to increase its revenue from car and motorcycle rental by 22% annualized growth to IDR895 billion and used car trading by 32% to IDR988 billion.
Sustainable revenue stream from rental business. The Company’s car and motorcycle rental activities with their typical long-term contracts (mostly 5 years) have provided a steady revenue stream. For the past three years, revenues from long term rental contracts contributed about 50% of total revenue.
Clients for this type of service include a number of prominent corporations such as PT Telekomunikasi Selular (Telkomsel), PT HM Sampoerna Tbk (HMSP), PT Bank Central Asia Tbk (BCA) and PT Pama Persada Nusantara (Pama). Accordingly, with the policy to focus on long-term rental service, Serasi Autoraya should have a stable revenue stream in the medium term. Relatively strong cash flow protection.
Mainly supporting by relatively high margin from rental service, the company has managed to book relatively strong cash flow protection. The company’s EBITDA/Total Debt and EBITDA/IFCCI is expected to stay above 0.4x and 3.0x in the medium term. In terms of liquidity, the Company has an internal policy to always match cash inflow from operations, including proceeds from car disposal, with the debt payment.
The ratings are constrained by customer concentration risk. The company’s top ten customers in 3Q09 dominated by cigarettes distribution (HMSP, PT Panamas, PT Bentoel Prima) and mine-contractors (Pama and PT Thiess Contractor Indonesia, PT Kaltim Prima Coal), contributed about 20% of total revenues.
Any business disruption with these customers could have major impact to the company’s business and financial profiles. High dependence on external funding to support business growth. As a company involved in highly capital intensive business, Serasi Autoraya has and will always need external financing support for business expansion.
Therefore, the company’s business growth will be limited should there be tight liquidity in the banking system and capital market. Facing such a challenge would result the company being unable to fulfill customer demand.
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