Lahore, September 27, 2021 (PPI-OT):The ratings assigned to Dawood Equities Limited (“DEL” or “the Company”) draw comfort from improved financial performance, revamped business strategy, improved cost control measures and enhanced customer base. The assigned rating also incorporates the Company’s high exposure to market risk due to the proprietary book, augmented by well-established policies to mitigate conflict of interest. Revenue base of the Company largely comprises earnings from equity brokerage through mix of investors along with support from capital gains on investments.
Over the past few years, the Company has posted a steady growth in revenue leading to reduction in accumulated losses however, given the lack of diversity in operations profitability is likely to remain volatile. Going forward, the Company is planning to diversify its revenue stream through underwriting and advisory services. Zero leveraged capital structure and strong liquidity buffers continue to provide support to overall financial risk profile. During 9MFY21, the brokerage commission witnessed an increase of ~2.4x resulting in profit after tax of ~PKR 42mln (9MFY20: ~PKR 9.2mln).
While the equity of the Company stood at PKR 276mln at end Mar’21. This is supplemented by pledge of sponsor’s shares, with latest market value of above PKR 150mln, in favour of DEL. Based on these securities, in addition to the securities available on balance sheet, a credit line of PKR 150mln is exclusively available to the Company. The assigned rating is also supported by experienced management team. The Company has a lean organization structure with most of the heads reporting to CEO. Sound risk assessment and dedicated personnel for compliance function provides further support to the ratings.
The internal audit function of the Company is in house and reports independently to the audit committee. The Company has accustomed IT infrastructure in place. The ratings would remain dependent on the Company’s ability to sustain stable equity, improved profitability and stable market share. Furthermore retention of key personnel, strong Board framework, insightful monitoring of market risk, liquidity management, upholding strong internal controls would remain imperative.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com