PT Kawasan Industri Jababeka Tbk.

The negative outlook reflects the risk that Jababeka's EBITDA interest coverage could stay thin at below 1.5x over the next six to 12 months amid protracted soft operating conditions, steady capital spending, and the absence of a significant pickup in land sales and cash collection. We may lower the rating if Jababeka's EBITDA interest coverage stays below 1.5x with no prospect of a material and sustainable pickup, or if the company continues burning cash resulting in a declining cash balance. We believe annual EBITDA failing to exceed Indonesian rupiah (IDR) 720 billion sustainably, or annual capital spending exceeding IDR300 billion could trigger a downgrade. We could also lower the rating if the company's ongoing shareholder dispute starts to have a

...Limited rating headroom due to soft operating performance.We expect PT Kawasan Industri Jababeka Tbk.'s (Jababeka) interest servicing capacity to stay thin due to soft operating performance through 2020. While we anticipate a pickup in EBITDA in the fourth quarter of 2019, the EBITDA interest coverage is likely to remain at 1.5x over the next two years. This compares with our downgrade trigger of less than 1.5x. That level is thin compared with that of other 'B' rated regional developers with similar size, concentration, and earnings quality. Reduced credit risk from ongoing shareholder dispute. The shareholder dispute has so far had no direct and measurable impact on Jababeka's land sales or power generation. These businesses remain driven by prevailing soft operating conditions and the status of an offtake contract with state electricity distributor PT Perusahaan Listrik Negara (Persero) (PLN). The dispute has also not affected the company's capital structure or liquidity so far. We also...

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