'BB+' rating given to DGS $225m notes
'BB+' rating given to DGS $225m notes
JAKARTA (JP): Standard and Poor's, an international rating
agency, announced yesterday a "BB+" rating for the US$225 million
notes issued by DGS International Finance Company B.V.
The $225 million notes will mature in 2007 and are 10 percent
guaranteed by PT Daya Guna Samudera TBk (DGS), an integrated
fishing company listed on the Jakarta Stock Exchange.
The rating agency said the rating outlook was stable.
It also said DGS's rating reflected the state of its
profitable, low-cost fishery operations and favorable growth
prospects.
It said DGS's fishery operations were supported by access to
abundant fish resources.
It said that this mitigated the company's limited product
range, geographic diversity and vulnerable position as a small
player in global commodity fish markets.
Ambitious expansion and increasing reliance on debt-funding
would seriously harm DGS's financial position in the 1997 fiscal
year, the rating company said.
But with strong profitability, operating cash flow and its
flexible capital expenditure program the group should maintain
its credit rating, it said.
DGS's Benjina operation in eastern Indonesia's Arafura Sea is
the group's key earner. It generated about 55 percent of the
group's gross operating profit in 1996.
This was supported by Kimaan, the company's latest Arafura Sea
operation, which generated a further 10 percent gross profit.
Tarempa, in the South China sea, accounted for the remaining 35
percent.
About two-thirds of the company's capital expenditure program
is allocated to the Benjina and Kimaan operations, reflecting the
region's abundant resources and low level of competition.
The agency said that these two bases and in particular their
frozen fish operations would remain DGS's key earners in the
medium term.
"This will be supported by an expansion of the fish fillet and
surimi operations and new fishing ventures in DGS's unexploited
fishing areas," it said.
Despite its dependency on frozen fish sales, DGS should
continue to benefit from favorable market conditions in the Asian
region in the medium term, particularly as yields decline in
traditional fishing grounds, it said.
But the industry is very fragmented and despite its size DGS
represents less than one percent of the world's fish market.
The agency said that from an unrealistically strong position
in 1996, DGS will take a moderately aggressive line this year as
its debt will increase to finance the initial phase of its five-
year $1 billion expansion program. (hen)