Karachi, February 16, 2017: JCR-VIS Credit Rating Company Limited has maintained the entity ratings of Pearl Securities Limited (PSL) at ‘BBB/A-3’ (Triple B/A-Three). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Negative’. The previous rating action was announced on October 21, 2015.
The assigned ratings are underpinned by the sponsors’ profile, with major shareholding vested with General Provident and Investment (GPI) Fund, established by Government of Khyber Pakhtunkhwa. The fund holds 39% stake in the company while remaining shareholding is represented by individual investors.
Overall earnings of PSL witnessed decline during the outgoing fiscal year largely on account of lower income from settlement charges and equity brokerage operations; however, profitability was salvaged by lower finance cost and higher realized gains on investments. Though commission per share depicted increase on overall basis, equity brokerage income reduced in FY16 which was a result of lower total volume traded. Income from settlement charges has reduced significantly; however, the same continues to represent almost half of earning base.
Debt largely comprises running finance facilities primarily utilized to finance trade debts and the company’s proprietary book. While borrowings have partially been repaid, leverage indicators (adjusted for unrealized gain on investments) remain on the higher side, however they remain within parameters assigned to the rating band. Reduction has also been observed in the company’s investment portfolio. However, it continues to feature sizeable concentration in a single scrip indicating significant exposure to market risk. Liquidity indicators are thus constrained. Trade debts demonstrated sizeable increase where concentration was on the higher side. Receivable management is critical to maintain capitalization indicators at sound levels.
We have been given to understand that scrip-wise concentration will be reduced further by June 30, 2017, along with resolution of the aforementioned issues.
For further information on this rating announcement, please contact the undersigned (Ext: 208) or Mr. Jamal Abbas Zaidi (Ext: 207) at (021) 35311861-70 (10 lines) or fax to (021) 35311873.
Mohammed Khalid Ali
Applicable rating criteria: Methodology - Securities Firms Rating (May 2015)
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