JCR-VIS Credit Rating Company Limited
(JCR-VIS) has re-affirmed medium to long-term entity
rating of AAA (Triple A) and short-term rating of A-1+
(A One Plus) of Security Papers Ltd. (SPL). The outlook
on the medium to long-term rating is Stable. The ratings
have been re-affirmed on the basis of continued
demonstration of strong operational performance by the
company mainly based on its unique position as exclusive
supplier of its primary product i.e. security paper to
Pakistan Security Printing Corporation (Pvt.) Ltd. (PSPC).
PSPC is a wholly owned government organization and is
also the largest single shareholder of the company. The
strategic nature of PSPCs products implies that any
major shifts in its supply chain for key raw materials
would be improbable. This is led further credence by the
fact that SPL shares a common Chairman and Chief
Executive with PSPC.
In FY2005, SPL has also successfully
completed the first full year of operations of the new
paper manufacturing plant which had a beneficial impact
on the production of the company and hence sales
volumes. The new machinery is expected to adequately
meet the demands of PSPC in terms of quality and volume
in the next few years. Although, going forward, net
profits and cashflows of the company will be affected by
the change in tax policy with regards to presumptive tax
regime for manufacturing concerns, we do not expect this
to impact the risk profile of the company due to its low
leverage profile and strong demand dynamics. The future
BMR plans of the company mainly targeting upgradation of
the back processes are also expected to be largely
covered from internally generated cash flows
supplemented by the ample liquidity cushion already
available with the company.
