Announcements Corporate Rating Alerts

GCR affirms the A(ZA)/A1(ZA) national scale Issuer ratings on Quince Capital (Proprietary) Limited. Stable outlook.

Rating Action

Johannesburg, 11 November 2019 – GCR Ratings (“GCR”) has affirmed Quince Capital (Proprietary) Limited’s (“Quince”, “the company”) long and short term national scale Issuer ratings at A(ZA)/A1(ZA). At the same time, GCR has affirmed the international scale BB- rating. The outlooks are stable.

Rated Entity / Issue Rating class Rating scale Rating Outlook / Watch
Quince Capital (Proprietary) Limited Issuer Long Term National A(ZA) Stable Outlook
Issuer Short Term National A1(ZA)

GCR announced that it had released new criteria in May 2019. As a result, the ratings were placed “Under Criteria Observation”. Subsequently, GCR has finalised the review under the new methodology, and the ratings have been removed from ‘Under Criteria Observation’.

Rating Rationale

The ratings on Quince reflect the company’s strategic importance within the Reunert Group. This view is supported by its 100% ownership and 94% funding contribution by the parent, alongside its key strategic position providing financing to the Nashua franchises and their customer base.

South African based-Quince is a wholly-owned subsidiary of Johannesburg Stock Exchange listed Reunert Limited (“Reunert”, “the group”) via Reunert ICT Holdings (Pty) Limited (“parent”). The company is highly reliant on the group for its customer acquisition, strategy, capital and funding (94%). Whilst the entity operates under a separate legal name, for branding purposes the entity extends credit under the ‘Nashua’ brand name. GCR also believes that there are generally good levels of operational integration. Furthermore, the performance of the rated entity has been good over the past few years, with low loan losses and good profitability. On the other hand, Quince supplies only a moderate amount of wider-group income, supports one of three broader divisions within the Reunert group, and operates outside the typical realms of expertise for the group. As a result of all of the above, GCR considers Quince to be ‘essential’ but not ‘equal’ to the wider group, and therefore the ratings are dependent on wider group strengths.

The credit strengths on the South Africa based Reunert are supported by the net ungeared balance sheet, and therefore strong leverage and liquidity assessments, good earnings, alongside a diversified and robust competitive position.

Outlook Statement

The outlook is stable, reflecting the very conservative financial profile of Reunert and continued group support for Quince.

Rating Triggers

GCR views limited upside in the ratings over the next 12-18 months. However, if Reunert aggressively leverages, or its own financial performance deteriorates, we could lower the ratings on the subsidiary. Furthermore, any reduction in anticipated group support could also bring the ratings down.

Analytical Contacts

Primary analyst Sheri Morgan Senior Analyst: Corporates
Johannesburg, ZA morgan@GCRratings.com +27 11 784 1771
Secondary Analyst Matthew Pirnie Sector Head: Financial Institutions
Johannesburg, ZA matthewp@GCRratings.com +27 11 784 1771
Committee chair Patricia Zvarayi Deputy Sector Head: Corporates
Johannesburg, ZA patricia@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Corporate Companies, May 2019
Criteria for Rating Financial Institutions, May 2019
GCR Ratings Scale, Symbols & Definitions, May 2019
GCR Country Risk Scores, June 2019

Ratings History

Quince Capital (Proprietary) Ltd

Rating class Review Rating scale Rating class Outlook Date
Issuer Long Term Initial National A+(ZA) Stable August 2013
Last National A(ZA) Stable August 2018
Issuer Short Term Initial National A1(ZA) Stable August 2013
Last National A1(ZA) Stable August 2018
Issuer Long Term Initial International BBB- Stable August 2013
Last International BB- Stable August 2018

Glossary

Capital The sum of money that is invested to generate proceeds.
Cash Funds that can be readily spent or used to meet current obligations.
Cash Flow The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.
Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.

SALIENT POINTS OF ACCORDED RATINGS

GCR affirms that a.) no part of the ratings were influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument and d.) the validity of the ratings is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The credit ratings have been disclosed to Quince Capital (Proprietary) Limited. The ratings were solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the ratings.

Quince Capital (Proprietary) Limited participated in the rating process via face-to-face management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information used to analyse Quince Capital (Proprietary) Limited and accord the credit ratings included:

  • Audited financial results as at 30 June 2019 (and four years of comparative numbers);
  • Board risk packs;
  • Funding breakdowns;
  • Other publicly available information.


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