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Lahore, August 28, 2019 (PPI-OT): The ratings reflect the company’s subdued performance due to operating losses on the back of low volumes and depressed return of the equity market. The company has a modest market share in the brokerage industry. The company’s services mainly comprise equity brokerage. The ratings incorporate the company’s diversified revenue streams followed by investment advisory assignments such as private placements, underwriting, mergers and acquisitions and privatization. The assigned rating takes into account the company’s high exposure to market risk due to its proprietary book, which may indicate conflict of interest but the management has implemented adequate measures to cope with this risk.
The company has lean organizational structure where all department heads are directly reportable to the CEO. The company’s board is complying with the requirements of companies Act 2019 but can be strengthened by indulging an independent director. Furthermore, the company has adequate capitalization levels with the net capital balance of ~PKR 195mln at end Jun-19. The company has a moderate leveraged structure. The debt is well covered by liquid assets. However, the equity of the company eroded due to recent losses.
The ratings are dependent upon the management’s efforts to improve market share in volume and value. Meanwhile, strong BoD framework, insightful monitoring of market risk and liquidity management remains imperative. Retention of key personnel and continuous improvement in customer servicing tools will bode well for the company. Recovering the company’s equity base to agreed parameters will have a positive impact on ratings.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com