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May 20 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed the rating Long-Term National Tbk PT Mitra Pinasthika Mustika (MPM) at ‘A (idn)', and at the same time pull rank. Outlook on the ratings is Stable. Fitch has decided to discontinue ranking is not compensated.
Factors Ranked movers
Improvement of operational performance: The company’s expansion in the car rental business has resulted in operating cash flow and diversification of higher revenue streams to balance the volatility of the retail auto business. Performance motorcycle financing subsidiary, PT Sasana Artha Finance (SAF), also improved. SAF has reported positive net income for 2013, after mebukukan losses for the previous three years. Overall, we see improvement in credit metrics compared with the previous year. debt ratio net / EBITDA declined to 3.6x in 2013 from 5.2 x in the year 2012. Coverage ratio as measured by operating EBITDA / interest expense, also improved to 5.9 x 4.7 x in the same period the previous year.
Diversification of income: MPM rating is supported by the diversification offset the volatility of the motor retail business. Other business enterprises includes manufacturers of motor lubricants, car rental services, financing, and insurance. Compared to the automotive retail business, leasing business and lubricants produce a more stable income and higher margins. Since this year, MPM will also sell the Nissan and Datsun.
Market Leadership: MPM rating also reflects its leadership in the its businesses. MPM is a leading distributor of Honda motorcycles in East Java and East Nusa Tenggara, which is where the company has 67% market share. The company is also the second largest car rental company based fleet, and being one of the largest motorcycle manufacturers in the lubricant Indonesia.
The new structure for the subsidiary and new shareholders: Fitch positive view MPM plans to merge two subsidiaries financing - MPM Finance (A-(idn) '/ stable) and SAF - and partnered with JACCS. JACCS, finance companies in Japan, will inject funds and take effective 40% ownership in the combined company. Fitch expects JACCS arrival will provide funding and access to more knowledge well, particularly in the field of risk management.
Expansion is limited by: Rating companies limited by its expansion especially in the field of car rental and car distribution which will raise the ratio debt. We estimate free cash flow (free cash flow) to remain negative within the next three years. However, Fitch believes that most of the spending capital can be lowered and the company has a good track record in execution. Fitch also believes that the company’s liquidity will remain adequate given the company access to bank and capital markets are quite good.