PACRA maintains entity ratings of SLGL

October 17, 2024 (MLN): PACRA has maintained Secure Logistics Group Limited's (PSX: SLGL) entity ratings, with a long-term rating of A+ and a short-term rating of A1, which remained unchanged as of October 14, 2024, according to the company's filing on PSX

The rating outlook remains stable, reflecting consistent financial performance since the previous rating action in May 2024, when the company was upgraded to these levels.

SLGL is an integrated logistic group with synergetic business lines of Logistics, Asset Tracking, and Security Services.

Since its PSX listing, SLG has achieved key milestones in FY24, including substantial debt repayment and upgrading its commercial vehicle fleet.

Ongoing efforts include expanding logistics services to regional markets through the TIR license, investing in IT infrastructure, developing a B2B marketplace, and expanding the distribution segment with new vehicles.

The company’s management and shareholders also have an established track record of value additions through capital markets as evident from its recent IPO and M&A activities.

SLG has recently announced its plans to merge Trax Online Pvt. Ltd. into SLG and/or one of its subsidiary companies through a Scheme of Arrangement to be approved by the competent High Court.

SLG has stated that it will endeavour to close the Transaction by December 31, 2024.

Ratings take comfort from SLG’s above-stated objectives, ongoing value proposition and deleveraging which is also enhanced by its holding company structure and the formidable ownership arrangement which includes prominent local and international investors and sustainable business fundamentals, all underpinned by well-established repute and relative market position.

The Board of SLG is compliant with the code of corporate governance and comprised of highly skilled individuals with extensive yet diverse experience and independent oversight roles.

During IHCY24 the Company’s top line grew by ~14.4% and recorded at PKR 1,027mln, supported by price inflation and an increase in capacity utilization leading to improved margins at all levels.

The logistic industry of the country is highly fragmented with a dominating unorganized segment. It has also faced challenges due to soaring inflation, rupee devaluation, and high policy rates.

On the flip side, there exists a notably sluggish pace of technology adoption, hindering the infusion of innovation and efficiency.

However, the PKR stability, expected additional reduction in policy rates planned enhancements to existing road infrastructure and the establishment of new SEZs under CPEC projects augur well for the logistics industry.

The financial risk profile of the Company is considered good with comfortable coverages, cashflows, and working capital cycle.

The current capital structure is low leveraged as a post-IPO substantial portion of borrowings has been paid off. The company intends to fund all future expansions through internally generated cash flows.

The ratings are dependent upon the improvement in business profile and successful implementation of business strategy.

A prudent financial performance in line with the financial projections, an effective liquidity profile, and maintaining financial discipline shall remain imperative.

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