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Rating action

Scope Ratings Gmbh (Scope) has today assigned a first-time issuer rating of BB/Stable to Mobilbox Kontener Kereskedelmi Kft. Senior unsecured debt has been rated BB+.

Rating rationale

Mobilbox’s business risk profile, assessed at BB, mainly benefits from its solid market positions in the relevant CEE markets, which strongly support its competitive position. Furthermore, Mobilbox has consistently delivered very high operating profitability thanks to its high asset intensity, disciplined pricing strategy and the expansion of its lucrative spare parts and services activities. Scope adjusted EBITDA margins have averaged 43% since 2015 and Scope expects them to remain in the 40%+ range in the next few years. The business risk profile is constrained by the company’s small size (HUF 21.6bn revenues in 2021e or EUR 60m) as well as a modest level of diversification in terms of customer, product and geographical outreach.

Mobilbox’s financial risk profile, assessed at BBB, is supported by its low leverage and strong interest cover. Leverage as measured by Scope-adjusted debt/EBITDA has been in the 0.5x to 1.3x range since 2015 (0.5x at year-end 2020). Despite the planned bond issuance and an estimated HUF 0.8bn cash earmarked for potential M&A in Europe,Scope expects this ratio to stay in the 1-2x range in the next two years thanks to solid EBITDA. EBITDA interest cover has been very strong over the past few years (above 20x since 2015). Despite the additional debt issuances of 2021 and 2022 (including the planned bond issue), Scope does not anticipate any noticeable deterioration in this debt protection ratio.

Cash flow cover (FOCF/Scope-adjusted debt) has been more volatile than the other credit metrics in recent years. This reflects the evolution of the investment cycle and its impact on FOCF. The sizeable increase in net capex in 2021 and 2022 will lead to negative cash flow cover in 2021 and 2022, before a normalisation in 2023.

Scope considers Mobilbox’s liquidity to be adequate. The group holds ample cash balances, which safely cover short-term maturities. The negative FOCF caused by the planned capex expansion and higher working capital needs, will weigh on liquidity in 2021 and 2022. Scope expects liquidity to improve significantly in 2023 thanks to the return to positive FOCF as capex normalises.

The company’s limited size and outreach compared to other entities rated BB+ hinder it to exceed the assigned BB issuer rating (reflected by a negative one notch adjustment on the standalone rating).

Outlook and rating-change drivers

The Stable Outlook reflects Scope’s expectation that Mobilbox will successfully issue the planned HUF 3bn senior unsecured bond in 2022 and that the group will invest the funds in accordance with its business plan. The Outlook also incorporates Scope’s expectation that the group will maintain a prudent financial policy, notably in terms of dividend payments and discretionary spending (bolt-on acquisitions) helping to keep Scope-adjusted debt/EBITDA between 1-2x.

Scope views a rating upgrade as remote at this stage, but a positive rating action may be warranted by a significant growth in Mobilbox’s size, leading to improved diversification in terms of customers, products and geographies, while keeping credit metrics in line with Scope’s rating case.

A negative rating action could take place if SaD/EBITDA increases to around 4x on a sustained basis.

Long-term and short-term debt ratings

In view of the ‘above average’ expected rate of recovery, Scope has assigned a BB+ debt rating to Mobilbox’s senior unsecured debt, one notch above the issuer rating. Scope’s recovery analysis is based on a HUF 20.2bn estimated liquidation value in a hypothetical default in 2023.

Mobilbox Kft. plans to issue a HUF 3bn senior unsecured corporate bond under the Hungarian National Bank’s Bond Funding for Growth Scheme. The bond will feature a tenor of 10 years, 10% annual amortisation of the principal amount between 2027 and 2031 and a 50% bullet repayment at maturity (2032). The bond coupon will be fixed (up to 5%) and payable on an annual basis. Proceeds from the bond issue are earmarked for the purchase of new containers to extend the rental fleet. Scope assumes that the business plan and investment programme will be executed as planned.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodology used for these Credit Ratings and/or Outlook, (Corporate Rating Methodology, 6 July 2021), is available on https://www.scoperatings.com/#!methodology/list.
Scope Ratings GmbH and Scope Ratings UK Limited apply the same methodologies/models and key rating assumptions for their credit rating services, while Scope Hamburg GmbH’s methodologies/models and key rating assumptions are different from those of Scope Ratings GmbH and Scope Ratings UK Limited.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/#!governance-and-policies/rating-scale. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://www.scoperatings.com/#governance-and-policies/regulatory-EU. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/#governance-and-policies/rating-scale. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://www.scoperatings.com/#!methodology/list.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting the Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Georges Dieng, Director 
Person responsible for approval of the Credit Ratings: Philipp Wass, Executive Director
The Credit Ratings/Outlook were first released by Scope Ratings on 10 February 2022. 

Potential conflicts
See www.scoperatings.com under Governance & Policies/EU Regulation/Disclosures for a list of potential conflicts of interest related to the issuance of Credit Ratings.

Conditions of use/exclusion of liability
© 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.