The credit rating of International Medical Center of Biomaterials Processing and Cryostorage Public Joint-Stock Company (hereinafter, IMCB, Gemabank, or the Company) has been upgraded because the credit rating of PJSC Artgen (hereinafter, Artgen, or the Group) has been upgraded to BBB-(RU). Artgen acts as the supporting entity of the Company. Gemabank is a subsidiary of the Group, the guarantor of its bonds, and one of the main sources of financing for Artgen’s projects, therefore, when assessing the Company’s creditworthiness, the Group’s influence on it was taken into account.
Otherwise, the credit rating of IMCB is based on it maintaining strong liquidity, a very strong cash flow, and very high profitability. The Company’s financial risk profile is also characterized by low leverage, medium debt coverage, and a small size of business. The operational risk profile assessment, in its turn, takes into account the fact that Gemabank continues to hold leading positions in the narrow industry segment of banking of human cells and tissues, the medium assessment of corporate governance, and very high geographic diversification.
IMCB is the largest bank for personal storage of hematopoietic and mesenchymal cord blood stem cells in Russia for the treatment of critical illnesses. IMCB was founded in 2014 in order to more effectively manage the Group’s Gemabank project. The Company owns the exclusive rights to the Gemabank and Gemascreen trademarks.
KEY ASSESSMENT FACTORS
Medium operational risk profile assessment. The Company is mainly focused on providing services for the collection, isolation, cryopreservation, and storage of cord blood and umbilical cord cells. Gemabank continues to work on expanding its line of products and services, in particular, developing drugs to treat blood diseases using hematopoietic stem cells. The predominantly long-term nature of contracts for the storage of biomaterials (up to 20 years) provides the Company with stable revenue for cell storage services. The Company’s share in the Russian market remains at about 40% (at the end of 2023, Gemabank had over 40,000 samples in storage). IMCB operates in 85 cities of Russia and has representatives in Kazakhstan and Armenia.
Small size of business and very high profitability. Gemabank’s revenues amounted to RUB 284 mln in 2023 (an 11% increase year-on-year), while FFO before net interest payments and taxes grew to RUB 169 mln (43% higher than the year before). The Agency assumes the possibility of revenues growing in the forecast period of 2024–2026 due to an expansion of the geography of operations and a moderate increase in the prices of Gemabank’s services. Weighted average FFO before net interest payments and taxes for 2021 to 2026 is RUB 161 mln.
The weighted average FFO before net interest payments and taxes margin for 2021 to 2026 is 55%.
Low leverage and medium debt coverage. The Company’s loan portfolio includes two bonds due in 2027 and 2029. ACRA does not include the guarantee provided by IMCB for the parent company’s bond as debt because it takes it into account in the assessment of Artgen. The presence of this guarantee coupled with financing the development of the Group’s projects using issued loans and significant dividend payments is reflected in the assessment of the Group’s influence on Gemabank by reducing the Company’s standalone creditworthiness assessment (SCA) by one notch.
The ratio of total debt to FFO before net interest payments declined to 1.5x in 2023 from 2.2x in 2022. The weighted average value of this ratio for 2021–2026 is 1.5x, which is indicates that the Company’s leverage is low.
Debt coverage remains at a medium level. The ratio of FFO before net interest payments to interest payments was 5.4x in 2023. ACRA expects this indicator to be about 6.0x in the forecast period from 2024 to 2026.
Strong liquidity and very strong cash flow. The very high value of the weighted short-term liquidity ratio and the medium assessment of the quality of liquidity that factors in the peak repayment period on bonds (the Company’s sole funding source) in 2027 allow us to conclude that the resulting factor assessment is high.
The share of capital expenditures in the Company’s revenues grew to 5% in 2023 as expected and may amount to 3–4% in 2024–2026 due to an expansion of Gemabank’s operations and purchases of cryoequipment to store samples. The Company pays dividends in accordance with the approved dividend policy. The free cash flow (FCF) margin amounted to 31% in 2023, while the weighted average value of this indicator for 2021–2026 is 29%.
Medium corporate governance assessment. Last year, the Company migrated from IFRS to RAS for its financial statements (Gruppa Finansy LLC is the auditor). Gemabank’s performance indicators are also consolidated and published in the IFRS financial statements of Artgen. ACRA positively assesses the presence of a board of directors and a board committee at the Company, and the disclosure of key operational and financial indicators.
KEY ASSUMPTIONS
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No additional financing in 2024–2025;
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Capital expenditures in the forecast period as per the financial model presented to ACRA;
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Dividend payments at 100% of net profits in 2024–2026;
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No new loans from the Company to the Group’s companies.
potential outlook or rating change factors
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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Artgen’s credit rating being upgraded;
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Weighted average FFO before net interest payments and taxes exceeding RUB 500 mln;
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Weighted average ratio of total debt to FFO before net interest payments falling below 1.0x;
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Weighted average ratio of FFO before net interest payments to interest payments exceeding 6.0x.
A negative rating action may be prompted by:
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Artgen’s credit rating being downgraded;
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Weighted average FFO margin before net interest payments and taxes falling below 10%;
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Weighted average ratio of total debt to FFO before net interest payments exceeding 3.5х;
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Weighted average ratio of FFO before net interest payments to interest payments declining below 1.0х;
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Weighted average FCF margin falling below 5% and weighted average ratio of capital expenditures to revenues exceeding 10%;
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Significant deterioration of the liquidity profile.
RATING COMPONENTS
SCA: bbb.
Group’s influence: SCA minus one notch.
ISSUE RATINGS
No outstanding issues have been rated.
REGULATORY DISCLOSURE
The credit rating has been assigned to International Medical Center of Biomaterials Processing and Cryostorage Public Joint-Stock Company under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation, Methodology for Analyzing Rated Entities Associated with a State or a Group, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of International Medical Center of Biomaterials Processing and Cryostorage Public Joint-Stock Company was published by ACRA for the first time on July 20, 2022. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on data provided by International Medical Center of Biomaterials Processing and Cryostorage Public Joint-Stock Company, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited and International Medical Center of Biomaterials Processing and Cryostorage Public Joint-Stock Company participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to International Medical Center of Biomaterials Processing and Cryostorage Public Joint-Stock Company. No conflicts of interest were discovered in the course of credit rating assignment.
