Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
10-Jan-25 AA A1 Stable Maintain -
12-Jan-24 AA A1 Stable Initial -
About the Entity

Tourism Promotion Services (Pakistan) Limited, established on March 19, 1969, operates as an unlisted public company. The Company is governed by a seven-member Board of Directors, with Mr. Aziz Boolani serving as the Chief Executive Officer. With over 35 years of experience in the industry, Mr. Boolani brings momentous expertise to the role. TPSP is a key player in Pakistan's hospitality sector, managing nine Serena Hotels and Resorts across the country, as well as a Business Complex in Islamabad. During the year 2024, the Company commissioned Hunza Serena Hotel (82 rooms property) whereas Sost Serena Hotel (52 rooms property) is expected to be commissioned during the year 2025. The Company's registered office is located in Islamabad.

Rating Rationale

Tourism Promotion Services (Pakistan) Limited ("TPSP" or "the Company") manages and operates Serena Hotels across Pakistan, including the flagship Islamabad Serena Hotel. A prominent player in Pakistan's hospitality industry, the Company is recognized as a market leader, benefiting from consumer spending and urban development. The Serena brand is synonymous with quality, comfort, and exceptional service delivery, which has contributed to its strong market share in key segments such as Rooms, Food and Beverages, and Spa/Health Club services. TPSP is a Company with financially stable and moderately leveraged capital structure.

Key Rating Drivers

TPSP is actively expanding its hotel portfolio through new developments, renovations, and upgrades, all while upholding a strong commitment to environmental sustainability. Considering macroeconomic conditions and industry competition, the Company's ratings are reliant on its ability to sustain operational stability, optimize occupancy and profitability, and effectively manage financial risks. Furthermore, the Company’s ability to meet scheduled repayments remains essential to complement its ratings.

Profile
Legal Structure

Tourism Promotion Services (Pakistan) Limited ("TPSP" or "the Company") was established on March 19, 1969, as an unlisted public limited company. The Company's primary business activities include the development and operation of hotels and leisure facilities, as well as other tourism-related ventures. Additionally, TPSP owns properties that are leased for rental purposes. The registered office is located at the Islamabad Serena Hotel, situated in the Khayaban-e-Suhrawardy area of G-5/1 in Islamabad.

Background

TPSP owns and manages a network of nine hotels across Pakistan, operating under the Serena brand.

Operations

TPS has established itself as a prominent global hospitality brand, providing high-quality accommodation, distinctive holiday and conference solutions, as well as cultural heritage and adventure tourism experiences.

Ownership
Ownership Structure

The Company is a subsidiary of the Aga Khan Fund for Economic Development (AKFED), which holds a 95.47% stake in TPSP. Industrial Promotion Services owns 3.2%, while the remaining 1.33% is equally divided between the President of Pakistan and the Pakistan Tourism Development Corporation.

Stability

Established in 1969, TPSP has demonstrated a strong growth trajectory, ensuring the stability of its sponsors and underscoring the Company's significance within the group.

Business Acumen

The sponsors are active in multiple sectors of the economy and bring extensive expertise to the hotel industry.

Financial Strength

The sponsors are regarded as having strong financial strength.

Governance
Board Structure

The Board of Directors of the Company is composed of seven members, including the Chairman and the Chief Executive Officer (CEO).

Members’ Profile

The Chairman and other members of the Board have long-standing ties with TPSP, and all bring the necessary expertise to offer strategic guidance to the Company.

Board Effectiveness

The Board of TPSP has established several committees, including the Human Resource and Remuneration Committee, the Audit Committee, and the Risk Management & Corporate Governance Committee.

Financial Transparency

KPMG Taseer Hadi & Co. Chartered Accountants serve as the external auditors for the Company. They have issued an unqualified opinion on the financial statements for the year ending December 2023.

Management
Organizational Structure

The organizational structure of TPSP is divided into various departments, including Finance, HR, and Purchasing. The heads of these departments report directly to the CEO of the Company.

Management Team

Mr. Aziz Boolani, with over thirty years of extensive experience, currently serves as the CEO of the Company, a position he has held for more than twenty-four years. Mr. Syed Naveed Abbas currently holds the role of Chief Financial Officer (CFO) of the Company.

Effectiveness

The departments conduct various tests and analyses to identify discrepancies and assess the accuracy of transactions. Upon completion of their evaluations, a report summarizing the findings is submitted to the Board of Directors and other relevant stakeholders.

MIS

The Company has made a significant strategic move by implementing Oracle as its Property Management System (PMS), enabling the organization to generate detailed reports on a daily, weekly, and monthly basis. This provides senior management with essential insights into key performance indicators. Additionally, management is in the process of developing a Central Reservation System and Oracle Central Information System.

Control Environment

The internal audit department is a vital component of the Company, ensuring efficiency in reporting and adherence to standard operating procedures.

Business Risk
Industry Dynamics

The hospitality industry is expected to grow at a CAGR of over 6.56% from 2024 to 2029, driven by increased tourism and investment. Digital platforms like Booking.com have improved access to quality lodging. The sector has shown resilience, with ~28.6% rise in international tourism receipts and a ~115% surge in foreign tourist arrivals in CY23, indicating a strong post-COVID recovery. Northern destinations like Swat, Gilgit, Hunza and Kashmir have significantly contributed to this growth.

Relative Position

Serena Hotels is one of the leading 5-star brands in Pakistan, with a portfolio of 9 hotels across various cities, offering approximately 961 rooms.

Revenues

The Company's revenue is primarily generated from four key segments: (i) Rooms, (ii) Food & Beverages, (iii) Rental Income, and (iv) Ancillary Services. The largest portion of revenue comes from room sales, followed by food and beverages and rental income. For the 9 months ending in CY24, the Company's total revenue grew by approximately 14%, reaching PKR 11.2 billion, compared to PKR 9.9 billion in the same period last year. For the full years, the revenue was PKR 13.8 billion in CY23 and PKR 10.3 billion in CY22.

Margins

In 9MCY24, the Company achieved a gross profit (GP) margin of 56.7%, totaling PKR 6.4 billion, slightly lower than the 57.1% margin recorded in the same period of CY23 (CY23: 57.5%, PKR 8 billion). The operating margin for 9MCY24 increased modestly to 33.1% from 32.6% in 9MCY23, amounting to PKR 3.7 billion, although it decreased from the 34.6% operating margin in CY23. Net margins remained stable compared to the same period in the previous year at 20.4%, but showed a decline from 26.4% in CY23. The decrease in net profit is primarily attributed to a significant 42% rise in finance costs, which reached PKR 1.9 billion in 9MCY24, up from PKR 1.4 billion in CY23. This increase was mainly driven by the financing of new projects.

Sustainability

TPSP is deeply committed to addressing the concerns of local communities, particularly in preserving their traditions, culture, and fostering future growth. With a strong focus on environmental sustainability, the Company actively participates in various green initiatives aimed at reducing its carbon footprint.

Financial Risk
Working capital

The Company’s operational needs are primarily driven by its accounts receivable, as its business model does not require holding inventory. The Company has effectively managed its working capital by closely monitoring receivables and payables, which has resulted in stable gross working capital days. For 9MCY24, gross working capital days stood at 29 days, compared to 26 days in 9MCY23 and 23 days in CY23. Net working capital days have also remained consistent, registering 17 days in 9MCY24 and 9MCY23, in line with 14 days in CY23 and 16 days in CY22. This consistency in working capital management has contributed to improved liquidity for the Company.

Coverages

In 9MCY24, the Company’s EBITDA increased to PKR 4.2 billion, up from PKR 3.9 billion in 9MCY23, driven by higher revenue. However, the interest coverage ratio (EBITDA/Finance Cost) decreased to 2.2 times, compared to 3.8 times in 9MCY23 (CY23: 4.2 times), primarily due to a 54% increase in finance costs, which reached PKR 1.9 billion during the period (9MCY23: PKR 1.3 billion). Despite this decline, the interest coverage ratio continues to reflect the Company's ability to meet its financial obligations. Additionally, Free Cash Flow from Operations (FCFO) decreased by approximately 18%, falling to PKR 2.6 billion from PKR 3.2 billion in 9MCY23, primarily due to higher taxes paid during the period.

Capitalization

The Company maintains a balanced capital structure, with a leverage ratio of approximately 42% as of 9MCY24, reflecting an increase from around 32% in 9MCY23. A substantial portion of its debt, approximately 69%, is long-term. This includes Term Finance loans from United Bank Limited (UBL) and Askari Bank Limited (AKBL), which were secured to fund expansion and upgrade projects at the Hunza, Sost, and Peshawar Serena locations. In CY23, the Company’s leverage ratio was recorded at approximately 40%.

 
 

Jan-25

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Sep-24
9M
Dec-23
12M
Dec-22
12M
Dec-21
12M
A. BALANCE SHEET
1. Non-Current Assets 17,868 14,444 10,522 5,763
2. Investments 16,804 17,510 13,725 9,273
3. Related Party Exposure 0 0 0 0
4. Current Assets 2,748 2,256 1,512 1,252
a. Inventories 253 169 146 122
b. Trade Receivables 1,068 872 562 524
5. Total Assets 37,420 34,210 25,758 16,289
6. Current Liabilities 3,971 4,104 2,888 2,547
a. Trade Payables 490 446 248 207
7. Borrowings 13,535 11,466 7,520 1,014
8. Related Party Exposure 0 0 0 0
9. Non-Current Liabilities 1,030 1,241 1,207 831
10. Net Assets 18,883 17,399 14,144 11,897
11. Shareholders' Equity 18,883 17,399 14,144 11,897
B. INCOME STATEMENT
1. Sales 11,244 13,843 10,290 7,708
a. Cost of Good Sold (4,867) (5,882) (4,222) (3,104)
2. Gross Profit 6,377 7,961 6,068 4,604
a. Operating Expenses (2,656) (3,165) (2,928) (1,994)
3. Operating Profit 3,721 4,796 3,140 2,610
a. Non Operating Income or (Expense) 1,943 2,269 1,144 661
4. Profit or (Loss) before Interest and Tax 5,664 7,065 4,284 3,271
a. Total Finance Cost (1,925) (1,354) (354) (164)
b. Taxation (1,448) (2,059) (1,357) (732)
6. Net Income Or (Loss) 2,292 3,652 2,574 2,375
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 2,646 3,840 2,435 2,383
b. Net Cash from Operating Activities before Working Capital Changes 891 3,097 2,250 2,287
c. Changes in Working Capital (467) 16 170 76
1. Net Cash provided by Operating Activities 424 3,114 2,420 2,363
2. Net Cash (Used in) or Available From Investing Activities (1,299) (9,310) (5,856) (1,348)
3. Net Cash (Used in) or Available From Financing Activities 79 5,778 1,866 (830)
4. Net Cash generated or (Used) during the period (796) (418) (1,570) 185
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 8.3% 34.5% 33.5% 58.3%
b. Gross Profit Margin 56.7% 57.5% 59.0% 59.7%
c. Net Profit Margin 20.4% 26.4% 25.0% 30.8%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 19.4% 27.9% 25.3% 31.9%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 16.8% 23.2% 19.8% 21.9%
2. Working Capital Management
a. Gross Working Capital (Average Days) 29 23 24 26
b. Net Working Capital (Average Days) 17 14 16 17
c. Current Ratio (Current Assets / Current Liabilities) 0.7 0.5 0.5 0.5
3. Coverages
a. EBITDA / Finance Cost 2.2 4.2 13.6 27.0
b. FCFO / Finance Cost+CMLTB+Excess STB 1.0 3.0 4.1 3.8
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 10.6 3.6 1.4 0.3
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 41.8% 39.7% 34.7% 7.9%
b. Interest or Markup Payable (Days) 0.0 67.2 141.0 41.6
c. Entity Average Borrowing Rate 23.7% 14.5% 6.8% 9.6%

Jan-25

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