JCR-VIS Reaffirms Entity Ratings of Next Capital Limited

Karachi, March 19, 2018 (PPI-OT):JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the entity ratings of Next Capital Limited (NCL) at ‘A-/A-2’ (Single A-Minus/A-Two). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on January 19, 2016.

Next Capital Limited (NCL) was incorporated in 2009 as a public limited company. NCL is principally engaged in provision of equity, fixed income brokerage as well as corporate advisory and underwriting services. Majority shareholding of the company is vested with, Mr. Najam Ali, CEO of NCL. Institutional shareholders comprise Maple Leaf Cement Limited, Muslim Commercial Bank and Abbas Corporation.

The assigned ratings incorporate improvement in capitalization indicators, sound board level governance and expected sponsor support in the form of loans from directors. However, profitability of the brokerage industry has declined during HYFY18 owing to downturn of the same.

Market volumes for the industry increased during FY17 largely due to reclassification of Pakistan Stock Exchange (PSX) from frontier market to emerging market in the MSCI Index. However, during FY18, drying out of market volumes has decreased revenue across the brokerage industry. During FY17, NCL witnessed significant growth from last year in equity brokerage income due to an increase in volume of shares traded and increase in the overall commission per share in FY17. Nevertheless, loss has been incurred in HYFY18. This was largely due to realized and unrealized loss of short term investments. Efficiency indicator has also comparatively deteriorated during HYFY18 owing to lower gross revenues during the period, as mentioned above.

NCL’s equity position improved in FY17 due to rights issue, however, loss during HY18 led to a decline in equity. Nevertheless, capitalization levels have improved since last review. During FY17, gearing levels were high but declined in the latter half of FY17 owing to rights issuance. Leverage indicators have remained within manageable levels thereafter.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk