Philippine Rating Services Corporation (PhilRatings) assigned an Issuer Credit Rating of PRS A (corp.), with a Stable Outlook, for Cirtek Holdings Philippines Corporation (CHPC). This is in relation to the Company’s plan to continue issuing Commercial Papers (CPs) of up to ₱2.0 billion.
A company rated PRS A (corp.) has an above average capacity to meet its financial commitments relative to that of other Philippine corporates. The company, however, is somewhat more susceptible to adverse changes in circumstances and economic conditions than higher-rated corporates.
On the other hand, an Outlook is an indication as to the possible direction of any rating change within a one-year period and serves as a further refinement to the assigned credit rating for the guidance of investors, regulators, and the general public. A Stable Outlook is defined as: “The rating is likely to be maintained or to remain unchanged in the next twelve months.”
The rating and Outlook were assigned given the following key considerations: (1) the Cirtek Group’s established track record in the industry, supported by a strong and experienced management team that has navigated the Group through economic cycles, crises, and industry challenges; (2) CHPC’s strong customer base of well-established global companies, and which is diversified in terms of regions and industries; (3) although the long-term outlook is positive at present, the industry is highly competitive, cyclical, and is susceptible to adverse changes in various economies, and is characterized by the presence of larger international players; (4) earnings surpassed pre-pandemic levels supported by the steady recovery in revenues, although CHPC continues to face challenges in receivables collection; and (5) CHPC’s conservative capital structure.
PhilRatings’ ratings are based on available information and projections at the time that the rating review was performed. PhilRatings shall continuously monitor developments relating to CHPC and may change the rating at any time, should circumstances warrant a change.
CHPC is a fully integrated global technology company focused on wireless communication. CHPC is primarily engaged into the following related businesses: (1) the design, development and delivery of the wireless industry’s antenna solutions, (2) the manufacture of valued-added, highly integrated technology products, (3) the manufacture and sales of semiconductor packages as an independent subcontractor for outsourced semiconductor assembly, test and packaging services. CHPC is also the Parent Company of Cirtek Electronics Corporation (CEC), Cirtek Advanced Technologies and Solutions, Inc. (CATSI) and Quintel USA, Inc. (Quintel).
Members of CHPC’s senior management team have been with the company for over 35 years. Through this time, the Company was able to grow its operations amidst a highly competitive and cyclical industry with larger international players. CHPC’s management has likewise shown a deep understanding of the business and operations, and has kept abreast with industry and technological changes.
CHPC has been offering its products and services to several customers in the U.S., Asia and Europe, with 48%, 35% and 17% revenue contribution as of 9M2022, respectively. Such exposes CHPC to diversified risks relating to the performance of the economies where these customers are based, particularly with the impact brought about by the COVID-19 pandemic, supply chain disruptions, and geopolitical tensions.
The semiconductor industry is highly competitive and cyclical in nature, with the Company operating in a market with larger international players. It is likewise affected by various factors in international trade and the performance of several large economies. On a positive note, global semiconductor industry sales totaled $574.1 billion in 2022, the highest annual total and an increase of 3.3% compared to $555.9 billion in 2021. Sales, however, slowed down during the second half of the year.
CHPC’s net income for the first nine months of 2022 (9M2022) amounted to $8.5 million, notably exceeding full year 2019 pre-pandemic net income of $8.4 million. Bottom line was also up by 5% from the same period in 2021. Consolidated revenue generated during the nine-month period was $67.8 million, an 8% increase from 9M2021. Revenue growth was backed by the 44% jump to $19.3 million in Quintel’s revenue contribution, as well as the 5% uptick to $30.5 million in revenue from the semiconductor business (CEC).
Buoyed by higher earnings, CHPC recorded positive operating cash flows in 9M2022. Liquidity levels also remained satisfactory, with current ratio at 2.8x as of end-September 2022. PhilRatings notes, however, the persisting challenges in collection, resulting in receivables turnover being slower than prepandemic levels.
In relation to its leverage, CHPC’s debt to equity ratio remained low at 0.3x as of end-September 2022. This was mainly on account of the further reduction in debt levels.
