Agusto & Co. Limited whose strong credibility presence 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 hinged on the company’s satisfactory profitability and cash flow levels which are supported by the steady growth in the operating capacity since its inception in 2020 as well as the favourable terms with customers and creditors.
It said: “however, our rating of the company’s financial condition is constrained by the limited track record and SRL’s concentrated ownership profile. In addition, the rating takes into consideration the susceptibility of SRL’s operations to exogenous factors such as the rising energy and other business costs exacerbated by inflationary and exchange rate pressures and the potential adverse impact on margins.”
Smart Residences Limited is a unique hospitality and real estate company with operations in the Federal Capital Territory(FCT), Abuja.
The company commenced operation at the peak of the COVID-19 pandemic in 2020 as a provider of serviced short-let apartments to corporate and individual clients, generating revenue and cash flows from rental income.
The company started with 30 leased apartments but doubled the same within the first two years of operations. Smart Residences currently operates two leased properties each with a period of 10 years 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 N120 million in the prior year on account of the launch of additional 30 apartments and the price increases implemented in the period.
Smart Residences recorded an operating expense to revenue ratio of 59.8 per cent in 2021 amid the positive impact of economies of scale, thus resulting in a much-improved operating profit margin of 30.7 per cent in full year 2021, compared to the five percent recorded in its first year of operation.
The rating agency noted that, “we expect the company’s debt profile to inch up over the medium term based on management’s plans to inject debt funding into its capital structure.
“Going forward, Smart Residences plans to establish new apartments in carefully selected neighbourhoods to leverage the rising demand for luxury short-let apartments in Abuja with plans to expand to Kano and Lagos over the medium term.
“In addition, Smart Residences intends to widen its portfolio with the establishment of food and beverage retail outlets to meet customers’ demand as well as diversify its revenue stream from rental income.
“We expect the successful actualisation of these initiatives to potentially enhance the Company’s earnings over the near to medium term. However, our expectation is hinged on steady patronages across the Company’s apartments, barring unprecedented events that may disrupt the operations of the emerging flexible accommodation services in Nigeria.”