Riyadh: Tassnief has assigned long-term entity rating of ‘BB+’ (Double B Plus) and short-term entity rating of ‘T-5’ to Multi Business Group for Projects Company (‘MBG’ or ‘The Company’). The outlook on the long-term rating is ‘Stable’. Tassnief considers the rated issuer or issuance hold low to moderate credit risk. Risk profile may exhibit wide variation with changes in economic / sector conditions.
Rating Rationale: The ratings reflect a moderately large operational scale and a proven track record spanning 15 years in fit-out building contracting work and mechanical, electrical, and plumbing engineering (MEP). The organization has successfully completed over 100 projects for more than 50 clients. The business risk profile is influenced by ongoing projects, which indicate a decline in revenues during the first half of 2024, although revenue during the first half of 2024 indicates growth of 28% compared with the first half of 2023. Additionally, while the order backlog is low, client renewals provide comfort to revenue stability. There is a significant sales concentration risk due to a limited number of projects and small client base, leading to low revenue diversity. Successful execution of the business plan within budget and securing additional projects are essential for driving future growth.
The governance structure is above par, characterized by a recently established four-member board with independent directors, an active audit committee, external audit engagement, and adequate IT infrastructure. Additionally, MBG benefits from diligent project management, a seasoned management team, effective performance tracking, and the presence of ISO certifications. However, there is room for improvement in the area of recording detailed meeting minutes.
The financial risk evaluation considered a rising revenue trend accompanied by improved profit margins, which enhanced overall performance. The cash conversion cycle is manageable, and the aging profile of trade debts is satisfactory. Capital buffers are increasing due to profit retention, and the debt profile comprises solely long-term obligations. While repayment capabilities are adequate, there is risk associated with timing mismatches. Sponsor support remains crucial for handling client payment delays to maintain viability.
Rating Triggers: Maintaining the governance and control framework, securing sponsor funding for operational costs and growth support, and meeting revenue growth targets are essential. The company must also maintain its earnings profile, liquidity metrics, and leverage ratios. Any decline in earnings or key risk metrics could negatively impact the ratings.
About the Company: Multi Business Group for Projects Company is a Closed Joint Stock Company, registered in the Kingdom of Saudi Arabia (KSA). Headquartered in Riyadh, MBG also has three additional branches in the region. Business activities span fit-out building contracting and mechanical, electrical, and plumbing engineering.
For further information on this rating announcement, please contact Mr. Nabil Kadasa. email at RS@tassnief.com. The rating announcement can also be viewed through the below link
RELATED CRITERIA AND METHODOLOGY
Rating Methodology for Corporate (v.2. 2019) can be found on the website: www.tassnief.com
