Karachi, January 18, 2019 (PPI-OT): JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the entity ratings of Topline Securities Limited (TSPL) at ‘A-/A-2’ (Single A-Minus/A-Two). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on July 19, 2017.
The assigned ratings incorporate TSPL’s strong operating model and low exposure to credit and market risk given high proportion of Institutional Delivery System in overall volumes and no proprietary book. Ratings also reflect company’s healthy liquidity profile and capitalization indicators and existing market position. Ratings are constrained by cyclical nature of the brokerage industry.
Brokerage industry continues to be affected by economic cycles. Declining trend in trading volumes during FY18 and the ongoing year has impacted the topline of brokerage industry. Given the operating environment, players with efficient and variable cost structures focusing on high margin business and diversification in revenue streams are expected to fare better vis-à-vis peers.
Players with large proprietary books have also witnessed losses given weak market performance. Going forward, given low base effect of ready market volumes and growing volumes in the future segment and improved valuations post two consecutive years of decline in benchmark index, overall market volumes during FY19 are expected to be higher vis-a-vis FY18.
Topline has historically focused on high margin business and operates on a variable cost structure. This has resulted in limited increase in TSPL’s cost to income ratio vis-à-vis other industry players. Currently, brokerage income represents around nine-tenth of the company’s revenues. However, improved diversification in revenue streams is expected given strong corporate advisory pipeline. Moreover, improved liquidity and increase in benchmark rates is expected to translate into healthy growth in treasury income. Liquidity and capitalization indicators have improved on a timeline basis and are considered sound.
For more information, contact:
Director Compliance and Rating Analytics,
JCR-VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: http://jcrvis.com.pk/