Agusto & Co assigns “Bbb-” rating to smart homes

Agusto & Co. Limited, whose strong credibility and ratings are globally accepted in Nigeria and across the globe, has assigned a ‘Bbb-‘ rating to Smart Residences Limited (SRL).

Agusto & Co. said: “The rating assigned to Smart Residences is based on the company’s satisfactory profitability and cash levels which are supported by the steady growth in operating capacity since its inception in 2020 as well as on the favorable terms with customers and creditors.

He said: “However, our assessment of the company’s financial condition is limited by SRL’s limited track record and concentrated ownership profile. In addition, the rating takes into consideration the sensitivity of SRL’s operations to exogenous factors such as rising energy and other business costs exacerbated by inflationary and exchange rate pressures and the potential negative impact on margins.

Smart Residences Limited is a unique hotel and property company with operations in the Federal Capital Territory (FCT), Abuja.

The company began operations at the height of the COVID-19 pandemic in 2020 as a provider of short-term serviced apartments to businesses and individuals, generating revenue and cash flow from rental income.

The business started with 30 rented apartments, but doubled in the first two years of operation. Smart Residences currently operates two leased properties each with a 10-year term expiring in 2029 and 2031 respectively.

In the financial year ended December 31, 2021, Smart Residences recorded revenue of N474.1 million, a significant increase from the previous year’s N120 million due to the launch of 30 additional apartments and price increases implemented during the period.

Smart Homes recorded an operating expense to revenue ratio of 59.8% in 2021 as part of the positive impact of economies of scale, resulting in a much improved operating profit margin of 30.7% for the whole of 2021, compared to the 5% recorded in its first year of operation.

The rating agency noted that “we expect the company’s debt profile to increase over the medium term based on management’s plans to inject debt financing into its capital structure.

“Going forward, Smart Residences plans to establish new apartments in carefully selected neighborhoods to capitalize on the growing demand for luxury apartments in the short term in Abuja with expansion plans to Kano and Lagos in the medium term. .

“In addition, Smart Residences intends to expand its portfolio with the establishment of food and beverage retail outlets to meet customer demand and diversify its revenue streams from rental income.

“We expect the successful actualization of these initiatives to potentially improve the company’s earnings in the short to medium term. However, our expectations are based on regular attendance at the Company’s apartments barring unprecedented events that may disrupt the operations of the emerging flexible accommodation services in Nigeria.

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