Karachi, February 21, 2017: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed entity rating of Intermarket Securities Limited (IMSL) at ‘BBB+/A-2’ (Triple B Plus/A-Two). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on November 20th, 2015.
The rating takes into account sustained efforts by the senior management team to increase revenue generated through provision of brokerage services, improving proportion of core revenue through institutional clients and delving further into the international brokerage market.
During FY16, the brokerage department of IMSL has focused on developing a source for core brokerage commission income by creating and improving institutional client relationships. Total income generated from these clients has increased five-fold. Retail clients however continue to generate primary portion of total brokerage commission income. The company’s market share has increased to 4.49% (FY15: 2.06%) on total Share Volume traded.
IMSL has signed multiple broking agreements with international brokers based in the United States of America (USA) and in United Kingdom to develop strong international relationships to provide brokerage services to prospective clients. These are expected to develop into brokerage commission income where commission rates are on the higher side. Additionally, improvement in quality and efficiency of research reports has resulted in international brokers providing due compensation and entering formal contracts for sharing reports on the Pakistani market.
The company has maintained an experienced senior management team to achieve company targets in both domestic and foreign brokerage. Resultantly, growth in operating expenses has outpaced revenue generation, impacting operating profit levels. Going forward, the expenses would need to be rationalized in-line with revenue growth. Furthermore, the company has added an Internal Audit department that will support compliances with regulations and create operational efficiencies.
Given the expansion of operational activities, which would require greater levels of debt and equity, the company should consider addressing capital strength, going forward.
For further information on this rating announcement, please contact the undersigned (Ext: 208) or Mr. Javed Callea (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.
Mohammed Khalid Ali
Applicable rating criteria: Methodology - Securities Firms Rating (May 2015)
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