The Pakistan Credit Rating Agency Limited
12-Jul-17
Analyst
Mohsin Naseer
mohsin.naseer@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Asset Manager Rating Methodology | Jun-16
- Methodology | Debt Instruments Rating Methodology | Jun-17
Related Research
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PACRA Maintains Stability Rating of Pakistan Income Fund
| Rating Type | Stability Rating | |
|
Current (12-Jul-17 ) |
Previous (09-Dec-16 ) |
|
| Action | Maintain | Maintain |
| Long Term | A+(f) | A+(f) |
| Short Term | - | - |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The fund's investment objective is to earn reasonable rate of return by primarily investing in debt and fixed income securities without taking excessive risk.
The rating reflects strong credit quality and sound liquidity profile of the fund emanating from its 60% as cash placements and 8.2% exposure as term deposits with banks rated 'A' (7.1%), 'AA-' (67.1%) and 'A-' (4.6%) at end-May-17, while fund's exposure in PIBs was 0.5%. Meanwhile, there was a high exposure towards debt securities, primarily TFCs (19.1%) from financial sector. This highlights the fund's appetite for risk though currently these TFCs are mostly of good quality (AA- and above). The unit holding pattern of the fund is adequately diversified with top10 investors representing 45% of the fund's assets.
Going forward, the fund intends to maintain exposure to government securities, corporate debt securities and cash balances. The rating is contingent upon the fund's interest rate sensitivity and volatility in prices of TFCs in case of exposure to low rated instruments. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remain critical for the rating.
About
the Entity
MCBAH is a subsidiary of MCB Bank Limited (MCB). MCB holds majority stake (51%) in the company, followed by Arif Habib Corporation Limited (30%). The company is managing fourteen open end mutual funds along with two pension schemes with AUMs of ~ PKR 47bln at end-Mar17. MCBAH also manages an SMA portfolio of ~ PKR 24bln. Sizeable chunk of this portfolio is related to an associated company. MCB, the fourth largest bank in Pakistan in terms of asset size and branch network, has a very strong financial position, evidenced by a long-term entity rating of AAA by PACRA. Arif Habib Corporation is the holding company for Arif Habib Group with interests in the financial and industrial sectors.
MCBAH’s eight members BoD, three representatives from MCB including CEO, two representatives from AHG and three are independent. Mian Muhammad Mansha - Chairman MCB - serves as the Chairman on the board. Mr. Nasim Beg - a representative of AHG - acts as the Vice Chairman. Mr. Saqib Saleem, former Chief Operating Officer and Company Secretary, is leading the AMC as Chief Executive Officer.