PACRA maintains Broker Entity Rating of Aba Ali Habib Securities (Pvt.) Limited

Aba Ali Habib Securities (Pvt.) Limited (“AAH” or “the Company”) is primarily engaged in the provision of equity brokerage, alongside offering services of commodity brokerage and MFS/MTS. The clientele is fairly diversified between institutions/corporates and HNWIs/Retails. During FY22 and FY23, the brokerage industry faced challenges due to low investor interest caused by high-interest rates and inflation. Investors favored safer fixed-income returns over equities. However, 1HFY24 witnessed a surge in investor interest, driving the KSE-100 index to historic highs. Market stabilization is expected in FY24. On the other hand, political sentiments play a key role and the focus remains on the Government after recent elections to provide answers to economic stability. Moreover, continued support from the IMF remains critical. The assigned rating takes into account a sound business acumen of the sponsor family. The governance framework may be enhanced further with the induction of certified independent directors. AAH has a lean organizational structure, with most department heads reporting directly to the CEO. With seasoned management at the helm, AAH boasts a robust and well-established control framework. During 1HFY24, the market volumes rose by ~27% compared to 1HFY23, whereas AAH experienced a modest uptick of ~14% in revenue from equity brokerage during the same period. During 1HFY24, the Company earned a brokerage revenue of ~PKR 39mln (SPLY: ~PKR 34mln) and the income from MFS/MTS and dividend income has provided support with a contribution of ~PKR 38mln and ~PKR 16mln respectively. AAH reported a net profit of ~ PKR 309mln during 1HFY24 (SPLY: a net profit of ~PKR 56mln). The reasons behind the profit increase are twofold: first, there has been a reduction of ~49% in finance costs. Second, a capital gain of ~PKR 65mln and a gain of ~PKR 192mln on remeasurement of investments during 1HFY24 contributed to the profitability. AAH has a strong equity base of ~PKR 1,362mln at end-Dec’23 (SPLY: ~PKR 1,024mln). AAH actively manages its investment book whereby the funds are strategically moved between equity and fixed income avenues based on market expectations, thus managing its market risk. As part of its long-term strategic plans, AAH is planning to diversify its geographical expansion to improve retail clientele. The management also intends to improve the technological structure for swift on-boarding of retail clientele.
Moving forward, the materialization of planned revenue and geographical diversification is important for the rating. Maintenance and enhancement of market share and sustainability and growth in revenue and profitability remain vital. Meanwhile, it is imperative to uphold robust internal controls, retention of key management personnel, and diligently monitor risks.

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. AAH 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. AAH has six directors on the board including the CEO and three non-executive directors. The CEO, Mr. Zahid Ali Habib is a qualified professional with a diversified experience in capital markets.