CI assigns first-time ratings on GWC with 'stable' outlook

Capital Intelligence (CI) has assigned to Gulf Warehousing Company (GWC) first-time long- and short-term ratings on the Qatar national scale of ‘qaA-’ and ‘qaA2’, respectively with "stable" outlook.

"We see GWC as having a very sound financial profile. The company is by far the largest logistics services provider in Qatar, and it has a dominant market share in its home market," CI said in its latest report.

Although geographical diversification is still limited at present, the relatively new Omani operation (Flag Logistics) is performing well, with scope for further expansion in the future – although there are no firm plans for this at present, it said.

At home, the focus will increasingly be on improving margins by introducing higher value-added supply chain services, CI added.

The end-2024 asset base was dominated by fixed assets in the form of PP&E (73.5%), capital work in progress (2.2%) and right of use assets (4.4%).

The second largest asset class was net trade receivables at just 8.8%. With little additional capital expenditure planned in Qatar, the proportion of the asset base comprising fixed assets is expected to gradually decline going forward.

The company has a solid capital base, and one that will shortly be bolstered as a result of the planned issue of a subordinated perpetual sukuk.

Part of the proceeds of this issue is earmarked for the repayment of an existing QR300mn short-term borrowing. Other credit strengths include good cash flow and a dominant market position in the logistics sector in Qatar. This latter strength, however, means that achieving domestic volume growth could be a problem for GWC.

"GWC is, therefore, working to increase overall occupancy at its existing facilities in Qatar while at the same time seeking to grow the proportion of higher margin 3PL (third-party logistics) and 4PL (fourth-party logistics) revenues in its overall top line. This is important as freight-forwarding (FF) revenues normally carry lower margins than warehousing and supply chain management services," it said.

The management is expecting the current year to be stronger as volumes build at the Oman operation and as 4PL volumes build in Qatar.

Although this year could also see work commence on an Eastern province logistics operation in Saudi Arabia, this would be unlikely to contribute to revenues in 2025.

Considering effective liquidity to be satisfactory; CI said once the existing ST borrowing has been repaid, the only ST debt exposure will be the current portion of LT debt (about QR340mn at end-2024).

While the remainder of the sukuk issue proceeds is aimed at funding possible expansion into Saudi Arabia, this would take the form of a joint venture with a foreign partner, it said.

"In the meantime, these funds would remain on the GWC balance sheet as cash, with projected end-2025 cash balances showing a sharp increase as a result," it added.

GWC does not hold investment securities. Instead, liquid assets are held in the form of cash.

Given the nature of the business model, inventories are very low (less than 0.2% of total assets) but trade receivables are more significant at almost 9% of total assets, CI said, adding these are of high quality (given that the top five names are Qatar governmental or semi-governmental) and generally ST in tenor – although there are some concentrations by customer in both revenues and receivables.

The ratio of liquid resources to ST debt was 0.27x at the end of 2024, while the liquidity coverage ratio was 0.9x.