Fitch Affirms Aneka Gas Industri at 'A-(idn)'/Stable

12 June 2013
JAKARTA/SYDNEY, June 12

(Fitch) Fitch Ratings has affirmed Indonesia-based industrial gas producer PT Aneka Gas Industri's (AGI) National Long-Term rating at 'A-(idn)' with Stable Outlook. At the same time, the agency has also affirmed the ratings for AGI's IDR80bn bond I and IDR160bn sukuk ijarah I year 2008 due on July 2013 and IDR200bn bond II and IDR200bn sukuk ijarah II year 2012 due on December 2017 at 'A-(idn)'.

Key Rating Drivers
Established market position: AGI's ratings reflect its dominant position as Indonesia's leading industrial gas producer with a widespread distribution network across the country. Together with its sister company PT Samator, AGI controls approximately 50% of Indonesia's industrial gas market and a 90% share in medical gas. High initial capital investment required for the industry provides high barriers to entry which should ensure that AGI maintains a strong market share over the medium term.

Scale and metrics improvement: AGI's has been investing in capacity expansion since 2009 which has improved the company's scale. During 2009-2012, revenue has been growing consistently with a strong average growth of 23%. EBITDA margin has also improved to 27.3% in 2012 from 25.5% in 2009 due to higher plant utilisation and increasing exposure to the retail segment with higher margin.

Stability of cashflow from long-term contracts: Fitch draws comfort from the fact that 60% of AGI's revenue in 2012 was from long-term contracts with an average contract term of six years. This provides strong visibility on cash flow generation. Size and capex constraints: Despite strong revenue growth, AGI's ratings are constrained by its small scale and its heavy capex plan for 2013 and 2014. AGI will continue its plant expansion in the next two years by building two additional plants in Bontang and Palembang. Nevertheless, Fitch expects the company's leverage to remain appropriate for its ratings over the next three years at net debt/EBITDA of below 3.5x (2012: 3.3x).

Manageable execution risk: The ratings are supported by the company's track record in managing execution risk in the past 3 years. Despite the company's continuous expansion since 2009, cost and time overruns have been minimal. The agency also derives comfort from the fact that expansion has been generally supported by contracted revenues and equity injection from shareholders.

Rating Sensitivities

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

- a decrease in net debt/EBITDA to below 3x on a sustained basis

- an increase in EBITDA margin to above 30% on a sustained basis

Negative: Future developments that may, individually or collectively, lead to negative rating include:

- an increase in net debt/EBITDA to above 3.5x on a sustained basis

- cost overrun as a result of unexpected delay in capex

Contacts:

Primary Analyst
Erlin Salim
Associate Director
+62 21 2902 6410
Fitch Ratings Indonesia
Prudential Tower 20th Floor
Jl. Jend. Sudirman Kav.79
Jakarta 12910

Secondary Analyst
Olly Prayudi
Analyst
+62 21 2902 6412

Committee Chairperson
Vicky Melbourne
Senior Director
+61 2 8256 0325

Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email:

leslie.tan@fitchratings.com.

Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Additional information is available at www.fitchratings.com.

Applicable criteria, 'Corporate Rating Methodology' dated 8 August 2012 and 'National Ratings Criteria' dated 19 January 2011, are available at www.fitchratings.com.

Applicable Criteria and Related Research:

Corporate Rating Methodology

www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

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