Press Release

VIS Reaffirms Entity Ratings of Pak China Investment Company Limited
 

Karachi, June 25, 2020: VIS Credit Rating Company Limited (VIS) has re-affirmed the entity ratings of Pak China Investment Company Limited (PCICL) at ‘AAA/A-1+’ (Triple A/A-One Plus). The medium to long-term rating of ‘AAA’ denotes highest credit quality, with negligible risk factors, being only slightly more than for risk-free debt of Government of Pakistan. The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are outstanding and safety is just below risk free short-term obligations of Government of Pakistan. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 21, 2019.

The assigned ratings of PCICL incorporate implicit support of its two sovereign sponsors, Government of Pakistan (GoP) and People’s Republic of China (PRC), with equal shareholding held through Ministry of Finance (MoF) and China Development Bank (CDB), respectively. The ratings also take into account strong capitalization, diversified revenue stream, sound liquidity, and conservative risk appetite. Given the company’s diversified revenue stream, the impact of current pandemic may remain manageable. Delays in projects timelines may affect targeted growth and profitability, the extent of which remain to be seen.

During the outgoing year, gross advances portfolio witnessed a notable growth with fresh disbursements made to both public and private sectors. Concentration in advances portfolio has remained on a higher side. Asset quality indicators have remained largely intact. However, provisioning coverage and consequently net infection needs to be aligned with the assigned ratings. In line with the institution’s mandate, PCICL’s focus also remained on advisory and matchmaking between Chinese and Pakistani industries through JVs and advisory while also exploring the option of debt and equity exposure in high importance sectors thus promoting FDI in Pakistan.

Growth in investment portfolio was mainly manifested in market T-bills while investment in non-government debt securities also stood higher. Given the return on these instruments is pegged to market benchmark rate, interest rate risk arising from the same is considered low. While the investment portfolio predominantly comprises government securities, credit risk emanating from the same is considered minimal in the local context. Moreover, market risk arising from listed equities is also considered manageable given its low quantum. Strategic investments have been made keeping in view PCICL’s long-term business plan besides expectation of recurring income.

Borrowing increased to fund higher investment in government securities. While the proportion of liquid assets to borrowings (adjusted) decreased by end-FY19, it still remained sizeable. PCICL has also sufficient unutilized long-term credit lines available from various banks as a liquidity cushion as of now. Despite higher provisions charged against non-performing loans and impairment loss on investments along with increase in operating expenses, net profit increased mainly on the back of considerably higher topline during FY19. Augmentation in core equity was witnessed on back of profit retention and equity injection by sponsors. Capital Adequacy Ratio remained significantly above the regulatory requirement.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz at 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk .


Faryal Ahmad Faheem
Deputy CEO


Applicable rating criterion: Government Supported Entities (June, 2016)
https://www.vis.com.pk/kc-meth.aspx

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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 .

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