The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Assigns Initial Entity Ratings to Trust Securities & Brokerage Limited

Rating Type Entity
(20-Sep-22 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

Trust Securities and Brokerage Limited (“TSBL” or the “Company”) mainly provides the services of equity brokerage while commodity brokerage also adds to the topline. Subsequent to the takeover by the incumbent sponsors, the brokerage revenue has shown a decent improvement YoY. The Company earned brokerage revenue of ~PKR 304mln in FY21, parallel with the surge in market volumes while the investment in human resources also played its part. The revenue saw a dip in FY22, showing a reduction of ~32% to stand at ~PKR 144mln for 9MFY22 (SPLY: ~PKR 212mln), due to lackluster volumetric activity in FY22. However, future sales strategy to enhance institutional/corporate penetration along with materialization of commodity brokerage plans may support the topline. Furthermore, the Company is geographically diverse with branches in Lahore and Karachi, and has plans to further diversify their geographical presence, improving client outreach. The bottom line suffered a loss of ~PKR 14mln for 9MFY22 (SPLY: ~PKR 57mln) which is also attributable to the loss incurred on the sale of short-term investments amounting to ~PKR 13mln. The Company has an adequate equity base of ~PKR 289mln at end-Mar’22 while further injection would support the overall financial profile. The Company is managing its own proprietary book having a value of ~PKR 39mln at end-Mar’22 resulting in a manageable market risk exposure. The management has plans to increase the proprietary book size in the future which may elevate the market risk if the equity base is not enhanced with further capital injection. With a market share of ~2.5%, the Company mainly deals with HNWI’s; however, plans are in place to tap institutional clientele. Being a listed Company, the ownership is divested among different individuals and entities. The ratings are supported by virtue of the Company being one of the few listed brokerage houses, and complying with Corporate Governance stipulations. A low leveraged capital structure and adequate liquidity buffers continue to provide support to the overall financial risk profile.
Going forward, further equity injection, sustainability and enhancement of market share, improvement in profitability through augmentation and diversification of revenues, and cost control is important. Retention of controlling stake, key management personnel, improvement in customer service tools, and maintaining strong controls will remain vital.

About the Entity
Trust Securities & Brokerage Limited is a TREC holder of Pakistan Stock Exchange and a member of Pakistan Mercantile Exchange Limited. The Company has been operating since 1993; however, the current owners took over in 2017. The Company is primarily owned by Mr. Junaid Shehzad Ahmed, who has a diversified business portfolio both in Pakistan and abroad. The Company's board comprises of seven members - two independent, three non-executive and two executive. The CEO, Mr. Abdul Basit, has been associated with TSBL for the last twenty seven years and holds command over diverse areas such as corporate, business and company laws, and SECP and NCCPL rules and regulations.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.