PACRA Assigns Initial Broker Entity Ratings to Aba Ali Habib Securities (Pvt.) Limited

Aba Ali Habib Securities (Pvt.) Limited’s (“AAH” or “the Company”) is primarily engaged in the provision of equity brokerage services while diversity exist in the form of commodity brokerage, MTS, MFS and IPO distribution. The Company enjoys a good market share whereas the clientele is fairly diversified between institutions/corporates and HNWI’s/Retail. In line with the improving market volumes and new client onboarding during 1HCY21 the brokerage revenue of AAH has also depicted an increase of ~95% to stand at ~PKR 101mln for FY21 (FY20: ~PKR 52mln) whereas for 1HFY22 the revenue stands at ~PKR 52mln. On the other hand, notable gains on short-term investments resulted in profit-after-tax of ~PKR 410mln for FY21 (FY20: ~PKR 3mln) and a profit of ~PKR 114mln for 1HFY22. The Company has a strong equity base of ~PKR 1,100mln at end-Dec’21 (Jun’21: ~PKR 986mln) which provides a cushion against unexpected shocks. The rating takes comfort from a low leveraged capital structure. The Company actively manages its investment book whereby the funds are strategically moved between equity and fixed income avenues based on market expectations. The market has observed volatility in terms of trading volumes in the recent months which may impact the commission revenue going forward. The Company provides sound client services whereas a strong internal control environment supported by outsourced internal audit provides comfort to ratings. However, the extent of policies may be enhanced further with the addition of more detailed guidelines. The assigned rating takes into account a sound ownership structure. The governance framework may be enhanced further with the induction of certified independent directors. In the near future, the management has planned to enhance the institutional clientele and to leverage on their experience of IPO distribution, the management is considering to venture into the IPO advisory and underwriting business. The management also intends to improve the technological structure for swift on-boarding of retail clientele. Moreover, geographical diversification is also under consideration to improve client outreach.
Going forward, improvement in core income, sustainability of market share and profitability and materialization of planned business strategies remains critical. Meanwhile, upholding strong internal controls, sound governance structure, retention of key management personnel and diligent monitoring of risks is important.

About the Entity
Aba Ali Habib Securities (Pvt.) Limited is a TREC holder of Pakistan Stock Exchange and a Member of Pakistan Mercantile Exchange Limited. While the Company has been operating since 1970, it was incorporated in 1996 as a Private Limited Company. The Company is registered with the SECP under Securities Brokers Regulations 2016. The Company is primarily owned by Mr. Aba Ali Habib who has been associated with the Capital Markets for over forty years, and has diversified experience in the field of Equity Brokerage. The Company’s Board comprises of six members including the CEO whereas four non-executive directors are also present. The CEO, Mr. Zahid Ali Habib possesses a diversified experience in capital markets. He holds a Master’s Degree in Finance from IBA. He has played a key role in developing risk management system at PSX and has served on various PSX committees.