Press Release

JCR-VIS Reaffirms Entity Ratings of Topline Securities Limited

Karachi, January 18, 2019: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the entity ratings of Topline Securities Limited (TSPL) at ‘A-/A-2’ (Single A-Minus/A-Two). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on July 19, 2017.

The assigned ratings incorporate TSPL’s strong operating model and low exposure to credit and market risk given high proportion of Institutional Delivery System in overall volumes and no proprietary book. Ratings also reflect company’s healthy liquidity profile and capitalization indicators and existing market position. Ratings are constrained by cyclical nature of the brokerage industry.

Brokerage industry continues to be affected by economic cycles. Declining trend in trading volumes during FY18 and the ongoing year has impacted the topline of brokerage industry. 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. Players with large proprietary books have also witnessed losses given weak market performance. Going forward, given low base effect of ready market volumes & growing volumes in the future segment and improved valuations post two consecutive years of decline in benchmark index, overall market volumes during FY19 are expected to be higher vis-à-vis FY18.

Topline has historically focused on high margin business and operates on a variable cost structure. This has resulted in limited increase in TSPL’s cost to income ratio vis-à-vis other industry players. Currently, brokerage income represents around nine-tenth of the company’s revenues. However, improved diversification in revenue streams is expected given strong corporate advisory pipeline. Moreover, improved liquidity and increase in benchmark rates is expected to translate into healthy growth in treasury income. Liquidity and capitalization indicators have improved on a timeline basis and are considered sound.

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

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 2019 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