Riyadh: Tassnief has maintained the long-term entity rating of Rawabi Holding at “A-” (Single A Minus) with a shortterm rating of T-3. The outlook on the rating is “Stable”. Additionally, assigned rating of the Sukuk has also been maintained at “A” (Single A Minus). Tassnief considers the rated issuer or issuance to hold high creditworthiness and thus low credit risk although the risk profile may vary with changes in economic / sector conditions.

Rating Rationale: The ratings of Rawabi Holding Company ('Rawabi Holding' or 'the Company') incorporates the Company’s strong market position, diversified operations, broad-based growth across key operating segments and expectation of continued growth momentum in revenues. Despite exposure to cyclical sectors, ratings factor in favorable industry dynamics which should support improvement in financial metrics including cash flow generation which has depicted significant improvement by around 3x in 2023 despite the impact being partly diluted due to elevated financial charges.

During 2023 and 1Q2024, strong double-digit growth was witnessed across key operating segments on the back of favorable industry dynamics and the Company aggressive expansion strategy undertaken in the preceding years. Business risk profile draws comfort from the Company’s established commercial partnership with Saudi Aramco, the presence of long-term service contracts and the Company being part of the operating expenditure of Saudi Aramco which supports business stability. Moreover, healthy order backlog supports medium-term revenue visibility. Growth momentum is expected to continue in 2024 with revenues expected to increase by 46% in 2024. For 2025, revenue growth would be supported by deployment of additional vessels (revenue from 46 new vessels is expected as compared to the current 105 vessels).

Assessment of financial risk profile incorporates improving core profitability driven by growing revenues and healthy margins despite sizeable increase in finance cost. Ratings are constrained by expansive financial policy, low debt servicing cushion and weak coverages.

These factors are partly mitigated by secured and guaranteed revenues over the long-term which balance the low business risk and expansionary financial policy. Despite increase in debt levels, the leverage ratio has remained largely stable due to growth in equity base through a combination of retained earnings, equity injection by sponsor and increase in revaluation reserves.

Rating Triggers: Key rating trigger involves translation of enhanced business profile into improvement in financial indicators through increasing debt servicing cushion & coverages and a shift towards a more conservative financial policy.

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About the Company:

Rawabi Holding is a diversified conglomerate through its wholly owned subsidiaries, consolidated and controlled joint ventures and affiliate investments, mainly focused on oil and gas services. The Company’s operations are segregated into 5 segments including oil field services, marine, contracting, industrial & manufacturing and investment. Ratings also take into account sound corporate governance framework in line with those of listed & established Tadawul players despite the Company being a Closed Joint Stock Company. Tassnief believes that Company’s focus on localization (local manufacturing), Saudization, ESG and training and strengthening resource capacity in a specialized industry will be a competitive advantage.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext. 6627) at email at RS@Tassnief.com.

RELATED CRITERIA AND METHODOLOGY
Rating Methodology for Corporate (v.2. 2019) can be found on the website: www.tassnief.com

TASSNIEF has conducted the exercise based on its approved Rating Methodologies and Policies in order to derive the credit rating opinion on Rawabi Holding Company. The credit ratings and observations contained herein are solely statements of opinion and not statements of fact or recommendations to purchase, hold or sell any securities or make any other investment decisions. All analyses related to the press release are merely opinions of TASSNIEF on the rating date and are not a guarantee of future performance. © Copyright 2024 by TASSNIEF