Press Release

VIS Upgrades Entity Ratings of Adam Securities Limited

Karachi, July 26, 2019: VIS Credit Rating Company Ltd. (VIS) has upgraded entity ratings of Adam Securities Limited (ASL) to ‘BBB/A-3’ (Triple B/A-Three) from ‘BBB-/A-3’ (Triple B Minus/A-Three). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on March 30, 2018.

The ratings assigned to ASL take into account additional equity injection of Rs. 15m during FY19. Despite challenging conditions, given an industry-wide drop in volumes, ASL has remained operationally profitable. In addition, the low leverage capital structure and high profit retention continue to translate in improved capitalization metrics. However, the assigned ratings remain constrained on account of deficiencies in the corporate governance infrastructure, which has albeit improved on a timeline.

In line with an industry wide drop in trading volumes, ASL’s brokerage income declined by 17% in FY18 whilst in 9MFY19, the same was 44% lower than corresponding period last year. Precipitated by the drop in trading volumes and lower one-off capital gains, ASL’s operating profit dropped by 70% in FY18, whilst they further dropped by another 23% in 9MFY19 vis-à-vis corresponding period last year. Nevertheless, given a very lean expense base, the company’s operations remained profitable. Furthermore, efficiency indicator has showcased improvement on a timeline.

Liquidity profile is considered adequate on the back of more than sufficient coverage of current liabilities by liquid assets while market risk is also considered manageable as most of the proprietary book is hedged through futures market. Minimal underwriting mandates were taken up during FY18 whereby ASL remained compliant with its overall and per party underwriting limits.

Lately, ASL has initiated 2 new business lines i.e. corporate finance advisory and commodities. Significant contribution from these newly initiated lines of business will help in revenue diversification, which is warranted.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 or fax to 35311872.

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 .

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