Karachi, TRG Pakistan Ltd (TRG) revealed significant financial challenges in its latest analyst briefing, posting a loss of PkR16.7 billion for the nine months ending FY24, a stark contrast to the PkR5.7 billion profit in the same period last year. The decline was largely due to a significant drop in the IBEX stock price and a revaluation of Afiniti's assets.
According to AKD Securities Limited, the management detailed various factors contributing to the loss. Key among them was the 27% decrease in the long-term investment value of TRG International (TRGI), which fell from PkR78.0 billion in FY23 to PkR56.7 billion in 9MFY24. This reduction is attributed to the weak financial performance of TRGI and the strengthening of the Pakistani Rupee against the US dollar.
The briefing also highlighted shifts in the investment landscape, where higher interest rates have led investors to move from equities to fixed-income assets, impacting valuations in the technology sector. Additionally, the Customer Experience (CX) industry, which includes companies like IBEX and Afiniti, saw a reduction in volume over the past year. This decline is mainly due to a tightened macroeconomic environment forcing consumer-facing brands to prioritize cost control.
Despite these challenges, the management does not consider the current downturn in volumes, related to the shift towards generative AI applications, as significant. They also noted that the level of maturity of generative AI technology is not yet sufficient to replace existing systems, though future volumes and demands remain uncertain.
Revenue forecasts for IBEX suggest a slight decline, with expected FY24 revenue of approximately US$506 million, down 3% year-over-year. However, an increase in earnings per share (EPS) from US$1.96 in FY23 to US$2.05 in FY24 is anticipated.
Afiniti faces its own set of challenges with a high debt load of US$500 million, deemed excessive for its operations. The company is planning a recapitalization and is negotiating with lenders to secure lower interest rates and extended maturity dates. Volatility in revenue from its top two clients also persists, with projections of a decrease in FY24 revenues compared to the US$266 million recorded in FY23.