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Increased State construction tenders lift H Young outlook

H-Young trucks at a construction site. FILE PHOTO | NMG
Global Credit Ratings (GCR) said the ratings reflected increasing success rate in tendering by the engineering and construction company. FILE PHOTO | NMG 

H Young & Company (East Africa) Ltd has been accorded a stable outlook, thanks in part to increasing government contract awards.

The firm as well had national scale issuer for long and short terms and commercial paper ratings affirmed at BBB-(KE), A3(KE) and A3(KE) respectively.

Global Credit Ratings (GCR) said the ratings reflected increasing success rate in tendering by the engineering and construction company.

GCR said the recent award of some very sizeable government infrastructure contracts — the largest being Sh10.9 billion—has seen the order book grow substantially to Sh22.6 billion as at July 2017 from Sh15 billion in 2016.

Early this year, H Young & Co (HY) and two other companies won a tender to construct KenGen’s #ticker:KEGN new 140 megawatt (MW) Olkaria V geothermal power plant in Naivasha.

The tender was worth $555 million (Sh57.4 billion) and construction is expected to be completed in 2019. The others were Japanese firms Mitsubishi Corporation and Mitsubishi Hitachi Power Systems (MHPS).

“Nonetheless, as is typical of the sector, H Young has reflected top line variability arising from the complexity and value of contracts executed. The increased work recently secured does provide revenue visibility over the next three years, while the group’s operating margins have resilience.”

“GCR expects that the group will continue to apply its prudent risk management policies, which should enable sound project delivery of the very large contracts taken on.

However, given that work of this scale has yet to be tested, progress will be monitored in terms of improvements in performance through the growth cycle,” the agency said in a rating notification.

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