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The Pakistan Credit Rating Agency Limited
Press Release

Date
23-May-22

Analyst
Uswa Sikandar
uswa.sikandar@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Rating to Entertainment Pakistan Limited

Rating Type Entity
Current
(23-May-22 )
Action Initial
Long Term BB
Short Term A3
Outlook Stable
Rating Watch -

Entertainment Pakistan Limited (EPL or the Company) enjoys two streams of income – Rental and through sale of developed properties. The company earns sublease income by subletting buildings that have been taken on Lease from DHA under first pivot, and develops its own real estate projects under second pivot. Company’s first real estate venture, “Dawood Homes” offers accommodations on 5 marla plots. The project involves construction on 38 plots (174 marlas) on the design of “G + 2K” and is located near Dream Gardens in Lahore. It is 85% complete with 11-12 buildings delivered. EPL transfers ownership as well as possession of apartments after installments are received completely. The company purchases land on deferred payment model for its projects and starts construction before transfer of land ownership which creates risk of land ownership disputes. As per management, payment for land of Dawood Homes has been made fully while payment for land of its second project, Roshan Homes will be completed in 2025. The company has recorded top line at PKR 54mln in Dec 21 (FY21: PKR 127mln) with 29.2% GP margin. EPL is not exposed to any significant financial risk as it does not have significant borrowings from banks. It instead borrows from sponsors and their close relatives. Company has received its first tranche of investment from REALL Limited UK for Roshan Homes in December, 21 amounting to PKR 27.5 million which is a soft debt at 6%, repayable in PKR. Completion risk and inflation risk of the company is low as units are constructed and handed over on batch basis which gives it flexibility over price setting. Regarding future plans, the company is committed to complete first building of Roshan Homes in Suncity Housing Scheme by early next year. It also plans to purchase more land there, develop it into plots and sell that.
Ownership of land and adequacy of financial strength remain crucial for the company. The ratings are dependent on timely completion of the projects along with delivering promised quality to develop positive brand image along with timely collection from customers against sale of apartments.

About the Entity
Entertainment Pakistan Limited is a public unlisted company incorporated in 2011, with shares almost equally divided among group of highly qualified and experienced individuals. The BoD consists of sponsors as well as 2 independent directors.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.