The credit rating of LLC «ASK-Stroitelstvo» (hereinafter, the Company, or ASK) has been affirmed as the operational risk profile assessments and the financial risk profile metrics have remained within the ranges set for this rating level.
The credit rating is based on the Company’s strong market position, very strong business profile, very low leverage and very high coverage, strong liquidity, high business profitability, and the medium level of corporate governance. Very high industry risk, below medium size of the business, and weak geographic diversification constrain the Company’s credit rating.
The Company is one of the largest residential real estate developers in Yekaterinburg and the Sverdlovsk Region. According to the Company, the floor space of its current project portfolio was 347,000 sq. m at the beginning of November 2024. In addition, ASK is building 186,300 sq. m of floor areas under government contracts.
KEY ASSESSMENT FACTORS
The industry risk is assessed as very high. According to ACRA’s methodology, a very high risk of the residential construction industry is a major factor that constrains the credit rating.
Strong market position and very strong business profile. The Company’s strong market position is determined by its leading indicators of residential floor space commissioned in Yekaterinburg in 2023 and 2024. ASK is also a Yekaterinburg’s leader in the construction of social and administrative infrastructure under government contracts. A significant portion of construction work is Carried out by the Company itself, and the Company’s production assets possess unique competencies. The very strong business profile is also based on the Company’s highly diversified project portfolio, stable structure of schedules and terms for project implementation, as well as a significant amount of self-manufactured materials. Strong brand and high construction standards support the Company’s ability to meet sales targets.
High profitability and below-medium size of business. The Company’s high profitability is mostly associated with a relatively low prime costs and fast construction progress as the Company carries out all construction work on its own and uses high-quality construction materials produced at its own factories. The Company’s efficiency is also supported by a balanced mix of projects in terms of their construction class (standard, comfort, business). The weighted average FFO before interest and taxes margin for 2022–2027 is estimated by the Agency at 14.9%, which indicates a high profitability. The size of the business is below medium because the weighted FFO before net interest and taxes for 2022–2027 is estimated by ACRA at RUB 3.9 bln.
The very low leverage and the very high coverage are the result of the Company’s conservative financial policy. In assessing the Company’s leverage, ACRA adjusted the total debt by the amount of debt raised through project financing and fully secured by funds received in escrow accounts from buyers. According to ACRA's estimate, the weighted average ratio of adjusted net debt to FFO before net interest will be below zero in 2022–2027 (negative adjusted net debt), while the ratio of total debt to equity will be 0.3х, which indicates a very low leverage. The coverage is very high: the weighted average ratio of FFO before net interest to net interest for 2022–2027 is expected to be 11.0x.
Medium cash flow and strong liquidity. The weighted average FCF margin for 2022–2027 is estimated by ACRA at 2.3%. The Company’s strong liquidity is driven primarily by the very low debt and the minimal amount of repayments, as well as the availability of undrawn credit lines.
KEY ASSUMPTIONS
-
Construction and sales volumes as planned.
-
ACRA takes into account only projects under construction and projects expected to be commissioned in accordance with the current financial plan of the Company.
-
No significant price fall in the primary real estate market of Yekaterinburg in 2025–2027.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
-
Much better geographic diversification and improvement of the Company’s management structure;
-
Weighted average FFO before net interest and taxes exceeding RUB 5 bln and weighted average FFO before interest and taxes margin exceeding 20%.
A negative rating action may be prompted by:
-
Weighted average ratio of FFO before net interest to net interest declining below 8.0x, and weighted average ratio of adjusted net debt to FFO before net interest exceeding 2.0x;
-
Prices in the primary residential real estate market of Yekaterinburg declining by over 15% in 2025–2027;
-
Regulatory changes that may impair the Company’s financials.
RATING COMPONENTS
Standalone Creditworthiness Assessment (SCA): a-.
Adjustments: none.
ISSUE RATINGS
The outstanding issue has not been rated.
Regulatory disclosure
The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of LLC «ASK-Stroitelstvo» was published by ACRA for the first time on December 21, 2017. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on the data provided by LLC «ASK-Stroitelstvo», information from publicly available sources, as well as ACRA’s own databases. The credit rating is solicited, and LLC «ASK-Stroitelstvo» participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA's opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to LLC «ASK-Stroitelstvo». No conflicts of interest were identified in the course of credit rating assignment.
