JCR-VIS Upgrades Entity Ratings of Adam Securities Limited

Karachi, March 30, 2018 (PPI-OT): JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has upgraded entity ratings of Adam Securities Limited (ASL) to ‘BBB-/A-3’ (Triple B minus/A-Three) from ‘BB+/A-3’ (Double B Plus/A-Three). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 31, 2017.

The assigned ratings to ASL derive strength from the company’s sizeable market share along with improvement in financial performance. However, ratings are constrained by the limited scope of corporate governance structure. In line with best practices regarding corporate governance, the company needs to develop and adhere to a comprehensive policy framework. ASL initiated its underwriting services in 2016. In addition to this, the company has acquired license for book running and is in the process of acquiring license for consultant to the issue.

During the ongoing year increase in short term investments was observed, nonetheless, market risk emanating from the same is limited as majority of the proprietary book is hedged by future contracts. There were five underwriting mandates undertaken during the year with minimal take up. ASL has remained compliant with its overall and per party underwriting limits during the period.

A twofold increase in equity brokerage income was witnessed during FY17 where growth in profitability being a function of higher market volumes and increased commission charged per share charged to clients. During HYFY18 market volumes substantially decreased resulting in drying out of the same, thereby affecting the HY18 revenues of brokerage firms, however; ASL managed a slight decrease in the topline owing to higher commission from individuals. Furthermore, efficiency indicator has showcased improvement on a timeline basis.

Equity base of the company was higher on the back of earnings retention and director’s loan. Leverage indicators are manageable owing to higher equity and limited borrowing. Ratings derive strength from the demonstrated financial support by sponsor which JCR-VIS expects to continue, if required.

For more information, contact:
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk