Press Release

VIS Reaffirms Entity Ratings of AKD Securities Limited

Karachi, September 27, 2019: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of AKD Securities Limited (AKDSL) at ‘A/A-2’ (Single A/A-Two). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on January 19, 2018. The long term rating of ‘A’ signifies good credit quality with adequate protection factors. Risk may vary slightly from time to time because of economic conditions. Short term rating of ‘A-2’ depicts good certainty of timely payment where liquidity factors are sound and good access to capital markets.

The assigned ratings factor in AKDSL’s long-standing experience in securities broking business, strong sponsor profile, sizeable retail client base and adequate leverage indicators. Ratings also reflect the Company’s sizeable market share which has been maintained at around 10%. While the company has managed to remain in operating profits over the last 2 years, overall profitability was impacted by re-measurement losses on short-term investments. Resultantly, equity base depicted a decline. Ratings also incorporate cyclical nature of the brokerage industry with performance of Companies in the sector dependent on market volumes.

Performance of the equity market has remained dismal over the past two fiscal years with dwindling trading volumes largely owing to economic slow-down, increasing interest rate environment and aggressive foreign selling. Given tough market conditions, players with efficient and variable cost structure along with diversified revenue streams managed to remain profitable.

AKDSL’s operating revenue has witnessed a decline post FY17 due to depressed market volumes; however, the company has maintained its efficiency indicator over time. AKDSL has a strong retail clientele which contributed around three-fourth of the total equity brokerage revenue. In absolute terms, corporate finance income remained around prior level in FY19. Management expects revenues from the segment to depict healthy growth in the ongoing year given present mandates in the pipeline and expected materialization of ongoing marketing activities into mandates with improvement in economic and market outlook. Going forward, focus on growth of retail operations is planned to continue through addition of new branches while strengthening other business lines. Ratings would continue to take account of market volumes and relative performances of market players in terms of market share, capitalization, capitalization levels and diversity of revenues.

For further information on this rating announcement, please contact the undersigned (Ext: 213) at 021-35311861-70 or fax to 021-35311873.




Jamal Abbas Zaidi
Advisor

Applicable rating criteria: Methodology - Securities Firms Rating (June 2017)
http://vis.com.pk/docs/Securities%20Firms%20201706.pdf

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