Rating Release

Agusto & Co hereby affirms the “Bbb-” rating assigned to Smart Residences Limited

The rating expires on 30 June 2024.

Agusto & Co hereby affirms the “Bbb-” rating assigned to Smart Residences Limited (“Smart Residences”, “SRL” or “the Company”). The affirmed rating reflects our opinion on SRL’s good profitability metrics upheld by robust growth in its operating scale and its relatively sturdy ability to pass on cost increases to its customers to preserve margins and strong cash flow position upheld by sustained net earnings growth. The rating also considers Smart Residences’ good position in the Flexible Accommodation segment of the Nigerian Hospitality Industry, improving fundamentals of the domestic tourism sector, which is positively influencing demand for affordable and flexible accommodation options and its adequate working capital position. Nevertheless, the rating is tempered by SRL’s elevated leverage metrics, concerns over its concentrated ownership structure, the susceptibility of its operations to external shocks such as rising energy and other operating costs due to higher inflationary pressures and the potential adverse impact on profit margins.

Smart Residences Limited is a hospitality and real estate firm that operates in the Federal Capital Territory, Abuja. SRL was established during the height of the COVID19 pandemic in 2020 and offers serviced short-term rental apartments to corporate and individual clients. The Company’s principal revenue sources are rental inflows on apartments, food and beverages sold to customers and event hosting income. Smart Residences Limited commenced operations with a portfolio of 30 leased apartments, and within its first two years of operation, it successfully doubled that number. Smart Residences currently manages three leased properties – The Residences, The Glass Residences and The Destination all under a 10-year lease agreement, while the fourth (The Home Away) is currently under renovation and is scheduled to become operational in November 2023.

The opinions expressed in this rating release do not represent any investment or other advice and should therefore not be construed as such. Visit www.agusto.com for further information.