PACRA Maintains Entity Ratings of Alfalah CLSA Securities (Private) Limited.
The ratings reflect the Company’s ability to sustain its market share, robust governance and association with a renowned international name, CLSA. After lackluster performance of the market in previous two years, volumes surged significantly (~74% increase) in 1HCY20 on YoY basis. This, coupled with introduction of revised minimum commission rates by SECP, is expected to have positive impact on brokers profitability. Although brokers having proprietary portfolio remain exposed to volatility in market. The topline of the Company improved in line with higher average trading volumes as the Company leveraged its association with Bank Alfalah (~61% stake holder), a leading bank in Pakistan, and CLSA (~25% stake holder), the largest investment bank in China backed by CITIC Securities. Alfalah CLSA's advisory services have yet to gain traction. The Company's financial profile is characterized by debt free capital structure and strong risk absorption capacity owing to its healthy liquidity profile. The Company does not have a proprietary trading portfolio, limiting its market isk exposure. The Company has adequate capitalization level with Net Capital Balance of ~PKR 137 mln, whereas Net Equity as at Dec-19 stood at ~PKR 238 mln (Dec-18 ~PKR 134 mln). The Company's strong ownership remains a key rating factor.
The rating is dependent on the Company's ability to leverage its association with CLSA to attract foreign investors and further improve revenues and profitability. Maintaining a strong financial profile and retention of key human resources remains important. Sustained trend of losses resulting in equity erosion will have negative rating implication. COVID-19 outbreak has impacted several sectors and economic indicators adversely. If the pandemic prolongs, it may impact the equity market and volumes , in turn brokerage industry, adversely.
Alfalah CLSA Securities (Pvt.) Limited is a financial services company, licensed as securities broker under Securities Brokers (Licensing and Operations) Regulations, 2016. The Company is engaged in equity trading. The Company also provides investment banking & advisory services. Alfalah Securities operates from Head office based in Karachi, Pakistan. It is a subsidiary of Bank Alfalah Limited. The bank owns ~61% stake in Alfalah Securities. CLSA now holds ~24.9% stake in the Company. The remaining shareholding lies with the Company's Chairman Mr. Aliuddin Ansari and the CEO Mr. Atif M. Khan. CLSA is a 100% owned subsidiary of CITIC Securities, the largest investment bank in China. As the international platform of CITIC Securities, China’s leading investment bank, CLSA is uniquely positioned to facilitate cross-border capital flows and connect China with the world and the world to China. Founded in 1986 and headquartered in Hong Kong, CLSA’s global network spans 22 locations across Asia, Australia, Europe and the United States.