Karachi, April 10, 2019 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of Next Capital Limited (NCL) at ‘A-/A-2’ (Single A-Minus/A-Two). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on March 19, 2018.

The reaffirmation of ratings incorporates established market position of NCL in the business of brokerage and corporate advisory services. Ratings also take into account the company’s diversified revenue streams which support overall business risk profile. Moreover, profitability profile has improved during HFY19 in contrast to peers. Ratings are constrained by weak sector dynamics and weakening in capitalization levels since last review.

Performance of the equity market has remained dismal over the last 22 months with trading volumes depicting a significant decline, largely owing to aggressive foreign selling, sizeable current account deficit and rising fiscal deficit and slow-down in GDP growth. 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. Going forward, focus of brokerage companies is expected to remain on cost rationalization, increased portfolio diversification into derivatives and focus on higher margin business. Nevertheless, sector outlook is expected to remain challenging.

Given the challenging operating environment, management has now enhanced focus on corporate finance and investment advisory segment. Further diversification in revenue streams is planned through new ventures. On the brokerage front, focus remains on retail brokerage. Overall earning profile has depicted weakening since last review; however, the company posted profit during HFY19 on account of cost control measures. Going forward, corporate advisory pipeline and change in taxation regime is projected to support profitability profile.

For more information, contact:
Director Compliance and Rating Analytics,
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/