Press Release

JCR-VIS Revises Management Quality Rating of Faysal Asset Management Limited

Karachi, October 12, 2017: JCR-VIS Credit Rating Company Ltd. has revised the Management Quality (MQ) Rating of Faysal Asset Management Limited (FAML) from ‘AM3++’ (AM-Three Double Plus) to ‘AM3+’ (AM-Three Single Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on May 4, 2016.

The company’s equity level remains below the regulatory minimum capital requirement of Rs. 230m. In order to bridge this gap, management is undertaking capital restructuring plan by way of a subordinated loan from its main sponsor, Faysal Bank Limited (FBL). This would enable regulatory compliance and facilitate in launching new funds. However, carrying return would not provide the revenue support given that proceeds from the loan will be placed in one of its funds; return from the fund is expected to offset cost of the loan.

Rating continues to be underpinned by operational losses being experienced by the company and turnover has been witnessed at key senior management positions since last review. Going forward, stability of the management team, which is being addressed, is considered important to achieve long term objectives of the company. Achievement of targets specified in the business plan is also a key rating factor.

Although the AMC has revamped its sales and distribution model, the total Assets Under Management (AUMs) amounted to Rs. 8.7b (FY17: Rs. 7.9b; FY16: Rs. 8.7b; FY15: Rs. 7.7b) at end-September 2017. As per projections, AUMs are targeted to reach Rs. 30b which are likely to aid in achieving breakeven by end-FY20. Proportion of retail investment has increased over past two years with continued growth efforts in this area. Although performance of the company’s smaller funds has depicted improvement - with respect to all other larger funds, there is room to deliver comparable returns relative to peers.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-70 or fax to 021-35311873.



Javed Callea
Advisor


Applicable Rating Criteria: Asset Management Companies (March 2016)
http://jcrvis.com.pk/docs/AMC-Methodology-201603.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright October 12, 2017 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.