Press Release

JCR-VIS maintains entity ratings of Pearl Securities Limited

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)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited VIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2017 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited