Press Release

VIS Maintains Entity Ratings of BMA Capital Management Limited
 

Karachi, May 12, 2020: VIS Credit Rating Company Ltd. (VIS) has maintained the entity ratings of BMA Capital Management Limited (BMA) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Stable’. The long term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk may vary slightly from time to time because of economic conditions. Short term rating of ‘A-2’ depicts good certainty of timely payment where liquidity factors are sound and good access to capital markets. The previous rating action was announced on April 2, 2019.

The assigned ratings factor in BMA’s long-standing experience in securities broking business and their market positioning. The revision in outlook takes into account overall improvement in trading volumes in the ongoing fiscal year. BMA has benefited from the improvement in trading volumes, posting an annualized RoAE of 13.7% in 1H’FY20 vis-à-vis losses in the preceding couple of years. So far, the brokerage industry has not been affected by the outbreak of the novel coronavirus, with trading volumes in 9M’FY20 already exceeding full year volume for FY19. Furthermore, the standardization in range/scale of brokerage commissions is expected to positively impact the revenue stream of brokers and translate in an improvement in industry-wide quality standards.

Business risk of BMA is lowered by an extensive retail clientele and market positioning as a large-sized player. In line with the strategy envisaged earlier, branch network has been increased to 16 from 11. Overall revenue mix continues to be significantly dependent on equity brokerage operations, which contribute ~80% of the company’s topline. Nevertheless, diversification has improved on a timeline and is aligned with peers. BMA’s asset mix has become conservative over a timeline, with higher liquidity retention and reduction in size of the proprietary book to 1.5% of asset base. Given improvement in trading volumes, trade debts as of Dec’19 were on the higher side, albeit the same depicted sound aging profile.

The back to back losses incurred in FY18-19 and dividend paid on FY17 profits, the company’s equity base has eroded by 30% as of Jun’19 vis-à-vis Jun’17. Given higher trading volumes during 1H’FY20, both gearing and leverage rose significantly, and stand on the higher side. Nevertheless, given improvement in profitability indicators, both measures are likely to reduce going forward. The assigned ratings remain dependent on maintenance of market positioning, liquidity & profitability indicators and normalization of capitalization measures in line with long term trend.

For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Javed Callea (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.



Faryal Ahmad Faheem
Deputy CEO

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

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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 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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited