The Pakistan Credit Rating Agency Limited
28-Jun-19
Analyst
Shahzaib Khalid
shahzaib.khalid@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
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PACRA Maintains Entity Ratings of EFG Hermes Pakistan Limited
| Rating Type | Entity | |
|
Current (28-Jun-19 ) |
Previous (28-Dec-18 ) |
|
| Action | Maintain | Maintain |
| Long Term | A- | A- |
| Short Term | A1 | A1 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect the company’s association with an international financial services group, EFG Hermes, and its emerging position in Pakistan’s brokerage industry. The rating incorporates strong sponsor support, robust governance framework and internal control environment. The company has a well-designed organizational structure, with the senior management reporting to the respective heads at group level. The company’s research department has foreign alliance and is centralized in U.A.E. As a group policy, the company does not engage in proprietary trading which keeps the market risk low. Due to lackluster market performance in CY18, the company suffered a total comprehensive loss of ~PKR 60mln in CY18. The equity base of the company stood at ~PKR 180mln at end Dec-18, which gives modest capacity to absorb financial risk.
Improvement in profitability, continuous monitoring of risk related parameters and retention of key human resource will bode well for the company. Meanwhile, maintaining its competitive position in the industry through diversification and volume based enhancement in revenues is critical for ratings.
About
the Entity
EFG Hermes Pakistan Limited, a public listed company, licensed under Securities Brokers (Licensing and Operations) Regulations, 2016 as a securities broker and provides securities research and brokerage services to institutional and individual clients. It is also engaged in investment banking activities. The company is 51% owned by EFG Hermes Frontier Holdings LLC, which is wholly owned subsidiary of EFG Hermes Holding S.A.E. EFG Hermes has presence in the Middle East and North Africa (MENA) region and specializes in asset management, securities brokering, investment banking, private equity and research. EFG Hermes is the first foreign investment bank and securities broker to have physical presence in Pakistan. The company operates from its head office based in Karachi, Pakistan.
Lately, Mr. Saad Iqbal has been appointed as the CEO of the company. The company has fourteen board members, including the CEO, of which four are independent. The board meets on quarterly basis to review the business performance.