Press Release

VIS Assign Initial Entity Ratings to Fawad Yusuf Securities Limited

Karachi, February 26, 2021: VIS Credit Rating Company Ltd. (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/ A-Two) to Fawad Yusuf Securities Limited (FYSL). The long term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk may vary with changes in 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. Outlook on the assigned ratings is ‘Stable’.

Incorporated in 2001, Fawad Yusuf Securities Limited (FYSL) is engaged in provision of equity brokerage services to domestic retail, high net worth individuals (HNWI) and institutional clients while the core revenue of the company primarily stems from dividend income earned on its significant amount of proprietary investment. The company operates through its head office and a branch located at Shah-re-Faisal, Karachi.

Assigned ratings incorporate company’s low leveraged capital structure, sound liquidity profile and strong capitalization as reflected by sizeable equity base which stands considerably higher vis-à-vis peers. Assessment of financial performance indicates improvement given that post two consecutive years of significant losses, bottom line has turned positive on the back of sizeable re-measurement gains on investments. The ratings are sensitive to company's considerable exposure to market risk due to the size of its proprietary book and concentration in few scrips. An increase in core revenue from brokerage income and diversification in revenue sources would lower risk of volatility in earnings. Moreover, ratings are constrained by governance framework of the company which may be improved through increasing board size, induction of independent directors, segregating the position of CEO from Chairman of the Board and increased oversight.

Uptick in industry trading volumes along with higher commission earned per share has improved brokerage revenues in FY20 and in the ongoing fiscal year. Management plans to continue this trend with expansion in branch and retail operations. Ratings take into account and depend upon the limits in place for leverage and underwriting to manage balance sheet risk. Meanwhile, upholding strong internal controls and diligent monitoring of risks is also important from ratings perspective.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 204) or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk



Faryal Ahmad Faheem
Deputy CEO

Applicable rating criteria: Methodology - Securities Firms Rating (July 2020)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/SecuritiesFirm202007.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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .