Press Release

JCR-VIS Reaffirms Entity Ratings of Arif Habib Limited
 

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November 24, 2017: JCR-VIS Credit Rating Company Ltd. has reaffirmed the entity ratings of Arif Habib Limited (AHL) at ‘AA-/A-1’ (Double A Minus/A-One). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on November 29, 2016.

The assigned ratings incorporate sound sponsor profile, as majority shareholding of the company is vested with Arif Habib Corporation Limited (AHCL). AHCL has sizeable interests in many different companies operating in diverse sectors including fertilizers, securities & commodities brokerage, corporate advisory, asset management, cement, steel, wind power and real estate development sectors. Moreover, healthy capitalization and financial indicators are also supportive of the ratings.

Board of directors at AHL includes members carrying vast experience in the financial services sector. Senior management also includes seasoned professionals. Ratings are also underpinned by adequate control framework implemented at the company. Board approved underwriting and investment policies are available. Going forward, compliance with investment and underwriting policy limits is considered important given the current rating levels.

Profitability of the company depicted sizeable increase in FY17; the increase was achieved on the back of growth in top-line and capital gains incurred on investments. Higher value of shares traded resulted in an increase in the equity brokerage income, while growth in corporate advisory income was a function of attainment of more mandates vis-à-vis preceding year. In line with growth in revenues, expenses also registered increase mainly due to higher compensation expenses. However, growth in expenses was relatively lower in relation to growth recurring revenue, resulting in an improvement in efficiency ratio. Variation in total revenue stream of the company would remain given the volatility in the two major revenues drivers, which include capital gains and corporate advisory income.

Proprietary book of AHL registered moderate growth in FY17. Since listed equity securities form a sizeable proportion of overall proprietary book, AHL is exposed to market risk. Liquidity profile of the company improved on the back of growth in liquid assets, which are considered more than sufficient to meet company’s liabilities. In 2016, AHL had sizeable investment in associates which are considered illiquid in nature. Quantum of the same reduced during the outgoing year. Liquidity profile of the company draws further support from the understanding given to us that, as and when required, AHL has firm commitment from its sponsoring company to buy back strategic investment from AHL’s short term investment portfolio.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at (021)35311861-71 or fax to (021)35311872-3.



Javed Callea
Advisor


Applicable Rating Criteria: Methodology - Securities Firms Rating (June 2017)
http://jcrvis.com.pk/docs/Securities%20Firms%20201706.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-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. JCR-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. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-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 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited