PACRA – Page 13 – PPI News Agency

December 23, 2020

PACRA Assigns Preliminary Rating to TPL Trakker Limited – Sukuk

Lahore, December 23, 2020 (PPI-OT): The ratings incorporate TPL Trakker’s prominent position in Pakistan’s tracking industry, emanating from its multifaceted product portfolio and sanguine technology infrastructure. As diversity becomes inevitable to sustain in its operating segment, the Company is gradually shifting towards business avenues that are more beneficial for company’s growth; the new segments have started to play their role however, incremental yet consistent cash flows remain pivotal. Recent developments precisely include acquisition of majority stake of Trakker Middle East LLC, and merger of TPL Maps and TPL Rupiya into TPL Trakker.

Post-merger, the mapping division and locations based Services (LBS) have already started achieving above-par results. Moreover, as per the Company’s plan, the process of going listed has been successfully completed – oversubscribed by 14.6% – hence, now stands as a public listed company from Aug’20. Underpinning the IPO, which got slightly delayed from its planned timeline, is the Privately Placed Commercial Paper (PPCP) which is providently redeemed and 20% remaining is deferred till Jan’21 under the SECP’s Relief Package.

The Company will soon be adding another Sukuk to its liquid profile, however, most of the Company’s financial obligations have been deferred, including Sukuk (PKR 600mln), therefore diluting the pressure in the shorter horizon. The Company still faces the pressure of high finance cost on account of its leveraged book, resulting in persistent bottomline losses in 3MFY21. The situation accumulates the impact of COVID-19 pandemic in the country which has led to severe economic disruption and demand deceleration. Currently, the Company’s financial risk profile exhibits a sigh of relief at all fronts; interest and debt coverages alongside capital structure and cash conversion cycles, endurance of which is necessitated.

The ratings are dependent upon the strength of the underlying security of the instrument. The instrument is secured through a tiered security structure. Apart from the ‘Hypo’ charges, additional charge is placed on the TPL Corp Limited’s long term investment of upto PKR 1500mln(~17M ordinary shares of TPL Insurance Limited and 100M ordinary shares of TPL Life Insurance Limited). In addition to this, specific comfort to the assigned ratings is being drawn from the inclusion of pre default mechanism, comprising a facility payment account and facility service reserve account in which one instalment will be maintained though out the term.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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December 22, 2020

PACRA Assigns Initial Entity Ratings to Orient Petroleum Inc. (Pakistan Branch)

Lahore, December 22, 2020 (PPI-OT): Orient Petroleum Inc. (Pakistan Branch) is engaged in upstream Oil and Gas business in Pakistan, it includes exploration, development and production of oil and natural gas reserves. Currently, OPI has six production leases which include Ratana, Dhurnal, Bhangali, Sinjhoro, Mehar and Sofiya and seven exploration licenses namely Sakhi Sarwar, Marwat, Harani South, Saruna, Kohlu, Sinjhoro and Mehar. Orient Petroleum Inc. (OPI) is part of the group which includes Zaver Petroleum Corporation (Pvt) Limited (Zaver “ZPCL”) and Orient Petroleum Pty Ltd. (OPPL).

The group is an established oil and gas business unit in Pakistan, with a portfolio of 9 Exploration Licenses and 8 Development and Production Leases. OPI’s management is pursuing an expansion strategy as it aims to make additions to its revenue stream, to support the bottom-line profit. OPI has 2P recoverable reserves of 31 MMBOE and net upside recoverable volume of 27 MMBOE from its production assets and 634 MMBOE resource potential from its exploratory assets.

The work program to enhance production volumes in the upcoming years will be supported through a mix of in-house financing and debt. The strength of the entity lies in risk adjusted recoverable reserves both from its production and development assets and exploration assets. With increased volume, the profitability will improve as the synergies and efficiencies will take effect. As a consequence, incremental cash flows will help the leveraged balance sheet, while augmenting the company’s ability to meet its obligations. The financial discipline has been good and would be pivotal to future fiscal management.

The ratings are dependent on sustained relative positioning of the company in oil and gas industry. Volatility in topline and profitability remains key areas for considerations. Financial discipline is considered core to the ratings, with enduring emphasis on maintaining relevant coverages.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com

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December 22, 2020

PACRA Maintains Entity Ratings of Sayban International, Outlook “Positive”

Lahore, December 22, 2020 (PPI-OT): Sayban International (“Sayban” or “the AOP”) operates in four segments: i) Pesticides ii) Micro-Fertilizer, iii) Seeds and iv) Fertilizer and is one of the leading players in the first segment. It has laid the milestone of introducing ‘bio fertilizers’ in Pakistan. The AOP has a sizeable turnover, with contribution from each segment, while pesticide business remains predominant in terms of revenue. Business profitability is sanguine. Sayban has managed to mark its presence in the market through operational efficacy.

The AOP retains it market share despite fragmentation in the crop protection industry and uncertainties at the economic and agricultural level. Pesticides, an essential commodity for food security, was included in the exception list from lockdown during COVID-19. Additionally, the attack of locust on Sindh Belt of Thar and near Kasur belt in Punjab encouraged the provincial governments to take aggressive steps and make adequate use of pesticides. Therefore, demand for pesticides on overall basis remain steady. Historically, Sayban was a part of the Auriga Group, through restructuring and separation of business partners.

Now, the AOP operates in the ambit of Sayban Group. The group has also set up other companies to expand its agricultural presence, one of which is a pesticides business – Comega Life Sciences (Pvt.) Ltd. Going forward, the Group plans to acquire Sayban International through a newly formed entity, Sayban Zarai Markaz (Pvt.) Ltd. Sayban meets its working capital requirements through a mix of internal cashflows and short term borrowings. Financial risk profile remains comfortable on account of moderately leveraged capital structure and strong coverages.

The assigned Positive Outlook captures the expected trajectory of Sayban in future wherein the top-line would grow and financial benefits would accrue. The ratings are dependent on sustained business and financial risk profile of the AOP. Meanwhile, improvement in governance practices would be beneficial for the ratings.

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December 21, 2020

PACRA maintains the Broker Management Rating of Arif Habib Limited

Lahore, December 21, 2020 (PPI-OT):The rating incorporates Arif Habib Limited’s (“AHL” or “The Company”) association with astute sponsors ‘Arif Habib Group’. The leading position of the Company emanates from its stable market share, established branches, and strong operational control environment. AHL has well experienced management team, sound governance framework and well established compliance protocols which bodes well for the rating. In addition to brokerage, AHL achieved a distinct position in advisory domain in Pakistan, resulting in diversified revenue base and competitive advantage over peers.

The Company has maintained a sizeable number of investors’ accounts including Institutional, HNWIs and Retailers. AHL has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML, CFT and whistle blowing policies. On investor’s front, investor’s guidelines, multiple account opening mediums and complaint management policies and procedures are in place. The Company offers various value-added services to its clients including an online trading terminal, research portal, and mobile app.

The Company has largely exposed to market risk due to its sizeable proprietary trading book. Related risks are deterred through well-defined investment policies. During 1QFY21, the Company achieved ~12% market share (1QFY20: ~10%) in the recent bull-run of stock market and posted a five years high profits supplemented by brokerage income and capital gains. The Net Capital Balance of the company reached up to ~PKR 1.5bln with an equity base of ~PKR 3.7bln as at end Sep’20.

Going forward, AHL will continue to focus on growing its retail clientele and branch network, which remains a core pillar of its strategy. On corporate advisory and underwriting front, the Company is expecting revenues from the segment, to depict healthy growth in the ongoing year given present mandates in the pipeline and expected materialization of ongoing projects. The rating is dependent on upholding strong control framework while effectively managing risks, particularly associated with proprietary investment book. Meanwhile, improving profitability from core income and maintaining market share is critical.

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December 21, 2020

PACRA Upgrades Entity Ratings of Ghulam Rasool and Company (Private) Limited

Lahore, December 21, 2020 (PPI-OT): Ghulam Rasool and Co’ has held commendable position in the construction industry for several decades. The subsequent three generations of the sponsoring family are the joint owners of the business. The functional and reporting responsibilities of management team are demarcated. The company has delivered multiple, public and government projects. GRC has a no-limit contract license. The company’s profitability and leveraging is adequate, and has non-funded banking lines as well as supplier credit to facilitate its business. Equity base of company is strong. GRC has historically contracted only government sponsored projects thus it relies on awarding of public works (Federal and Provincial PSDP + CPEC). The control environment needs to be strengthened.

The company has a defined strategy of building assets, required for its operations as well as investment purpose, through surplus cash. Debt is procured for the project financing, with reliance only on short term working capital excluding long term debt. GRC was originally focused on civil construction and irrigation works, but recently the firm is increasing its focus on hydel-power development. The company reported good profitability in FY20. The trend is expected to continue, indeed, improve. This is owing to the number and type of projects in hand. This has added to the equity book, which stands at a very comfortable level. GRC usually embarks upon large infrastructure projects in collaboration with different Chinese JV partners, which in their own right are established institutions.

The ratings are dependent on the sustainability of the business and its financial structure; sustaining a steady revenue stream and financial risk profile. Financial metrics need to be upheld as well. Any prolonged downturn in subdued business volume can have a detrimental effect on the rating. The company is working on a number of initiatives to strengthen itself internally and externally, which will improve its longevity and sustainability. The achievement and demonstration thereof would have further positive connotation for the ratings.

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December 21, 2020

PACRA Maintains Instrument Rating of Soneri Bank Limited

Lahore, December 21, 2020 (PPI-OT): The ratings reflect Soneri Bank’s maintained business profile as reflected by slightly-inched up system share (9MCY20: 1.9%, CY19: 1.8%). Markup Income witnessed jump attributable to hike in asset yield and higher earning asset on a period on period basis. The net revenue witnessed significant increase whilst gain on securities was also recorded. Core Spread witnessed a dip (9MCY20: 3.7%, 9MCY19: 4.4%) on the back of reduced policy rates.

Sustainability in NIMR and non-markup income, continued enhancement in non-fund based exposure is important for future years. SNBL’s customer deposits grew and CASA ratio experienced uptick (9MCY20: ~67%; 9MCY19: ~59%); where deposits remained tilted towards saving. Going forward deposit mobilization remains critical.

Covid-19 has posed challenges to all segments of the economy, worldwide and domestically, most sectors are getting negatively impacted. The ramifications would continue to unfold, warranting vigilance and timely actions where needed. The central bank has taken well-tailored and comprehensive actions including reduction in key policy rates (~625bps down since January 2020) and deferment of repayment obligations for a defined period.

While reduction in interest rates would determine the bank’s profitability, these measures have cushioned the allied risks surrounding the credit exposures. The Investment book has expanded significantly and fueled by borrowings from financial institutions. The bank’s total CAR stands at 17.3%. The bank also issued additional Tier-1 TFC (PKR 4,000mln) in CY18, thereby boosting its lending capacity.

The rating is a function of bank’s ability to maintain its market position in the banking industry while strengthening its overall risk profile. Bringing efficiency in operational structure is important for long term growth. In the comparative landscape, adding granularity to deposits and advances is critical. Meanwhile, a sustainable increase in system share and consequent profitability would be ratings positive.

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December 21, 2020

PACRA Maintains Entity Ratings of IGI Holdings Limited

Lahore, December 21, 2020 (PPI-OT): IGI Holdings Limited (“IGI Holdings” or “the Company”) emerged as a new entrant in the growing holding companies sector post restructuring of IGI Insurance Limited in 2017, consolidating Packages Group investments in financial sector i.e. Life and Non-life Insurance, Brokerage and investment holding company. The ratings reflect IGI Holdings strong standing as a HoldCo. with its key underlying businesses performing well in their respective sectors, providing a steady stream of dividends. IGI Investments, the investment arm of the group, has a sizable investment portfolio comprising strong players mainly financed through equity.

IGI General Insurance has shown growth in business volumes as well as profitability, while IGI Life is pursuing it’s growth strategy through market penetration and new products. The dividend flow from IGI Investments, a dominant contributor, remained low in 3QCY20 owing to general economic conditions on the underlying investments. This impacted the revenue of IGI Holdings.

Meanwhile, the Company’s subsidiary i.e. IGI Investments – completed its equity injection for acquiring 45% stake in S.C Johnson and Sons of Pakistan (Pvt.) Limited during the last quarter of 2020. The financial profile of the Company remains robust with low leveraged capital structure, strong coverage and adequate cushion in financing facilities. Going forward, dividend income from the subsidiaries is expected to remain sustained in the current economic environment.

The Company has a strong governance framework. The system and controls to monitor investments and making key strategic investments are evolving. Ratings depend upon sustained performance of existing strategic investments. Formalizing a strong and effective mechanism for monitoring performance and providing holistic direction to it’s subsidiaries would bode well for the ratings.

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