Karachi, April 14, 2022 (PPI-OT):VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of Multiline Securities Limited (MSL) at ‘A-/A-2’ (Single A Minus/A-Two). 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. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on February 12, 2021.
Assigned ratings continue to factor in the sound operating track record of more than two decades, sustained market share (at ~3% in terms of volumes traded) over the years, growing retail client base and low financial risk profile given low-leveraged capital structure and healthy liquidity metrics. Reaffirmation of ratings takes into account the healthy growth in core brokerage revenue and higher one-off capital gains in FY21 which led to improvement in profitability and equity buffers.
However, the growth has not sustained in the ongoing fiscal year in tandem with market trading volumes. Despite higher recurring income, the company’s cost-income ratio depicted slight weakening and is on the higher side vis-à-vis peers. Ratings remain constrained by the lack of diversification in revenues and sizeable propriety book (around one-half in relation to equity base) which results in significant exposure to market risk. Room for improvement exists in corporate governance framework in terms of board size.
The core brokerage commission constitutes ~90% of recurring revenue base while the remaining is generated by dividend income. Retail clientele forms the major proportion of brokerage revenue with limited presence by domestic institutions. Since last review, sizeable new clients have been taken onboard in both retail and corporate segments. Given adequate granularity in retail base, client exposures are fragmented and concentration risk is moderate. Moreover, the management has planned to initiate corporate advisory and underwriting services in the ongoing year, developments in this regard are underway. Going forward, managing market risk, improvement in research infrastructure and initiation of additional lines of business will be key rating drivers for the company.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/