Riyadh: Tassnief has assigned long-term national scale entity rating of “(BBB-)’’ (Triple B Minus) and short-term entity rating of “T-4” to Innovest Real Estate Company (‘Innovest’ or ‘the Company’). The assigned ratings reflect adequate creditworthiness, thus low credit risk. Risk profile may exhibit moderately high variation with changes in economic / sector conditions.
Rating Rationale: The assigned ratings are underpinned by Innovest’s growing presence in real estate development sector, satisfactory operational track record, and a strong portfolio of ongoing residential projects across key regions in Saudi Arabia. Ratings are constrained by historical volatility in business and financial risk profile, low quantum of cash flow generated from core real estate business over the last 3 years and weak leverage profile in terms of debt to FFO. However, comfort is drawn from sizeable land holdings and strong revenue visibility over the rating horizon which is expected to translate into an improved business and financial risk profile. The Company also has a satisfactory governance framework including effective board oversight, sound internal controls and experienced management team.
Innovest has strong execution capabilities, with over 1,100 residential units developed historically and ~2,000 units currently under development. Revenue witnessed growth driven by the execution of key projects such as Jadan Al Fursan and Jadan Al Sadan. The Company maintains reasonable business and geographic diversity, with projects spread across central, western and eastern regions. Revenue visibility is underpinned by strong ongoing project pipeline, with a sizeable share of villas already sold. However, business profile remains exposed to cyclicality associated with the real estate development sector and execution risk in the medium term due to a shift from government-backed to privately sourced developments. Going forward, increased pace of project execution, resulting in higher revenues and cash flow generation is considered important.
Rating Triggers
Negative rating triggers include
- Any significant increase in leverage indicators from current levels that impact the Company’s debt servicing ability.
- Significantly lower revenues and cash flow generation as compared to projections.
Positive rating triggers include
- Increase in revenue profile and cash flow generation.
- Achieving a more stable business and financial profile.
About the Company: Innovest Real Estate Company, referred to as “Innovest” or “the Company”, is a Closed Joint Stock Company registered in the Kingdom of Saudi Arabia under the commercial registration number 2051041820. Innovest is engaged in real estate development, housing, and construction of commercial and residential properties.
For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext. 6627) at +966-112506627 or email at [email protected].
RELATED CRITERIA AND METHODOLOGY
Rating Methodology for Corporate (v.2. 2019) can be found on the website:
www.tassnief.com