OMINVEST Corporate Ratings Assigned of BBB Long-term and A3 Short-term

05/10/2017 19:33 AST

Capital Intelligence Ratings (CI Ratings or CI), the international credit rating agency, today announced that it has assigned initial corporate ratings of 'BBB' Long-Term and 'A3' Short-Term to Oman International Development and Investment Company (Ominvest). The Outlook is 'Stable'. The ratings are supported by Ominvest's status as the largest listed investment company in Oman (and as one of the largest in the region), its moderate (although rising) leverage and its low ratio of debt to equity. Also supporting the rating are the high quality of the asset base, the good maturity profile of the funding base, comfortable debt service position, and large expected cash inflows this year and next from disposals and IPOs. Although the bulk of the investment portfolio is in the form of holdings in the wider 'financial' sector, these holdings are diversified across the banking, leasing and insurance segments, reducing concentration risk. As Ominvest chooses to report earnings on a total comprehensive income (TCI) basis rather than in terms of a traditional profit and loss, volatility in OCI due to fair value changes on assets (largely held by subsidiaries) have tended to produce considerable volatility in the TCI bottom line as well. This to some extent is also a constraining factor.

At the parent company level, funding comes from equity and bank borrowings. The latter have been rising but the quantum is not excessive, debt related ratios are satisfactory and the maturity profile is favourable, while the Company enjoys a low cost of funds. At current levels, rising borrowing is only a minor constraint. In terms of liquidity, the main investment holdings are in unlisted companies – which reduces effective liquidity. However, the planned sale of Oman Orix Leasing later this year and the two insurance company IPOs will bring in substantial liquidity (and at least temporarily reduce debt), while at the same time enhancing the liquidity of the shares retained as these will then be listed. The final constraint relates to Oman itself. As Ominvest's investments are very largely Oman-based, performance at subsidiaries and associates is affected to a considerable degree by the overall performance of the economy. The fall in oil prices hit Oman quite hard and has impacted sovereign ratings as it has placed government finances under pressure. Although not currently the main constraint on the rating (CI Ratings' Sovereign ratings for Oman are 'BBB+'/'A2'/'Stable'), the state of the economy could become the main constraint quite quickly should public finances weaken significantly. In terms of non-financial supporting factors, the Company has a strong and experienced management team, a well-defined strategy and investment philosophy, and a very solid risk management architecture.

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