Tag Archives: JCR-VIS Credit Rating Company Limited

JCR-VIS Upgrades Fund Stability Rating of HBL Government Securities Fund

Karachi, January 15, 2018 (PPI-OT):JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the Fund Stability Rating (FSR) of HBL Government Securities Fund (HBL GSF) from ‘A(f)’ (Single A (f)) to ‘A+(f)’ (Single A Plus (f)). The previous rating action was announced on January 05, 2017. During the on-going year, PICIC Income Fund (PICIC IF) was renamed to HBL Government Securities Fund (HBL GSF) post amalgamation of PICIC Asset Management Company into HBL Asset Management Limited. HBL GSF aims to provide its investors superior risk adjusted returns through active duration and liquidity management tools.

The change in rating takes into account the revision in target duration from 2 years to 1.5 years. Moreover, Weighted Average Time to Maturity (WATM) and duration remained well within the specified limits. The assigned rating also accounts for maintenance of adequate liquidity levels as signified by a sizeable portion of assets invested in bank deposits. Asset allocation of the fund remained in line with the policy guidelines defined by management.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

JCR-VIS Reaffirms Fund Stability Rating of First Habib Cash Fund

Karachi, January 15, 2018 (PPI-OT):JCR-VIS Credit Rating Company Limited has reaffirmed the fund stability rating (FSR) of First Habib Cash Fund (FHCF) at ‘AA (f)’ (Double A(f)). The previous rating action was announced on January 02, 2017. FHCF is an open-end money market fund; in line with its categorization, exposure to various sources of risks has been maintained at low end of the risk spectrum, both by policy and actual asset allocation. The fund is mandated to hold assets with minimum rating of ‘AA’.

The fund’s constitutive documents also limit Weighted Average Maturity (WAM) at 90 days. Actual asset allocation has remained conservative with average exposure in ‘AA’ and above rated investment avenues. However, violations of JCR-VIS’s criteria of maintaining 25% of net assets in ‘AAA’ rated exposures were noted during the review period. The fund’s WAM has also remained within the allowed limit. FHCF’s unit holding features concentration, however given the liquidity profile of assets, ability to meet redemptions is considered sound.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

JCR-VIS Reaffirms Corporate Governance Rating of Allied Bank Limited

Karachi, January 11, 2018 (PPI-OT):JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the Corporate Governance Rating of Allied Bank Limited (ABL) at “CGR-9+”. This rating is based on a scale ranging from CGR-1 (lowest) to CGR-10 (highest). The previous rating action was announced on November 09, 2016.

The rating reflects presence of strong corporate governance framework at ABL underpinned by sound internal control environment, financial transparency and regulatory compliance. The Board consists of seasoned professionals with diverse background. Performance evaluation of the Board members and Board Committees has been completed according to the detailed guidelines regarding performance evaluation. A professional and experienced team manages the control functions. Periodic rotation of the Group Chiefs is considered positive for effective implementation of succession plan.

ABL has provided sufficient transparency and disclosures regarding financial reporting and other relevant company’s affair. The Bank has hired the services of one of the top practicing firm as external auditors. Shareholders have smooth communication with the management. The Bank has taken various steps to further enhance relationship with employees. At the same time, the Bank is focused on improving customer service.

ABL has taken various initiatives to enhance effectiveness of compliance culture across the Bank. Internal audit and risk management framework have also been strengthened. The Bank regularly updates its technology to the latest version to improve its efficiency and efficacy. In pursuit of ABL’s vision to provide innovative digital banking experience to its customers, the Bank has introduced various business solutions.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

JCR-VIS assigns initial Entity Rating to Shajar Roads Limited

Karachi, January 04, 2018 (PPI-OT):JCR-VIS Credit Rating Company Limited has assigned initial Entity Rating of ‘A/A-2’ (Single A/A-Two) to Shajar Roads Limited (SRL). Outlook on the assigned ratings is ‘Stable’. SRL is a public unlisted company established to undertake dualization and oversee management and maintenance of existing 43km Sheikhupura – Gujranwala Road (SGR). The company was incorporated by a consortium of infrastructure development companies, namely Habib Construction Services (HCS), Niaz Muhammad Khan and Brothers (NKB) and Deokjae Construction Company Pakistan (DJP). SRL has entered into a concession agreement with the Government of Punjab (GoPb) for a period of 25 years in this regard.

The SGR project will be established under the Public Private Partnership (PPP) regime, with one of the sponsors, HCS, responsible for the construction of the road. Management expects to achieve the financial close by-end Jan 2018 and the projected timeframe of road construction is 1 year. Total cost of the project is approximately Rs. 5.8b, which will financed through a mix of debt (60%) and equity (40%).

The assigned ratings incorporate sound financial profile of the sponsors, their experience in infrastructure projects, presence of sub-sovereign concession agreement, and are supported by a structured debt service mechanism in place, in the form of an escrow account, to facilitate timely debt repayments. Debt Service Coverage Ratio (DSCR) is expected to remain at adequate level during the debt repayment period and leverage indicators are expected to improve over time on the back of debt repayment and increase in total equity. Moreover, SRL will maintain a Debt Service Reserve Account (DSRA) equal to two peak instalments at all times.

As per the concession agreement, demand risk pertaining to lower than projected traffic is borne by SRL. However, ratings derive comfort from the projected traffic volumes being in line with the data provided by traffic survey study conducted by the Communication and Works department of GoPb; the same are also conservative as the survey does not take into account the projected increase in traffic after dualization of the road. Moreover, no competing or alternative road exists within a radius of 10km of the route, and the government will compensate SRL for the loss in revenues in case any alternate or competing route is constructed in future. Keeping in view all the aforementioned factors, projected traffic volumes are considered sustainable.

The project entails construction risk and SRL is liable to pay liquidated damages to GoPb in case of any delay beyond substantial completion date. However, this risk is partly mitigated by undertaking provided by the EPC contractor to bear the liquidated damages in case of delay in project. Moreover, sound profile and operational history of EPC contractor also provides comfort in this regard. We understand that adequate contingent costs have been incorporated in the financial model to address cost overrun risk.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

JCR-VIS Reaffirms Management Quality Rating of JS Investments Limited

Karachi, January 04, 2018 (PPI-OT):JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the Management Quality Rating of JS Investments Limited (JSIL) at ‘AM2’ (AM-Two) with a ‘Stable’ Outlook. The previous rating action was announced on January 5, 2017. JSIL manages a total product suite comprising fourteen open end funds and fifteen SMAs. Net Assets under Management (AUMs – adjusted for Fund of Funds and Separately Managed Accounts) amounted to Rs. 12.3b (FY17: Rs. 13.4b, FY16: Rs. 8.7b) at end-December 2017 with market share of JSIL maintained at 2.0%. In pursuing a growth strategy, JSIL plans to launch two new funds in the balanced and dedicated equity categories and four new plans in the active allocation/capital preservation space in the coming year. Achievement of targets specified in the business plan remains a key rating factor.

Rating continues to be underpinned by the operational losses being experienced by the company and turnover at key senior management positions since last review. Earlier in CY17, JSIL experienced a change at the helm, with Mr. Hasnain Raza Nensey assuming the office of Chief Executive Officer. Following this, management level changes were witnessed at positions of Head of Research, Head of Information Technology, Head of Human Resources and Administration and Chief Strategy Officer.

Revamping of customer relations department has been undertaken by adding additional resources. Investment management and research teams were also bolstered by hiring of new fund managers and research analysts. Compliance and risk, as a combined function, monitors various aspects pertaining to regulations, market and operational risk. Going forward, stability of the management team, which is being addressed, is considered important to achieve long term objectives of the company.

In line with its growth strategy, the management’s focus is geared towards strengthening retail outreach of the sales team through an extensive hiring program. In addition to the development of in-house sales team, progress has also been made recently in enhancing the utilization of the parent bank’s network for generating sales in the tranche-based active allocation plans. AUMs were also contributed by the parent bank’s branch network in two (02) active allocation plans already launched.

JCR-VIS will continue to monitor the results of these initiatives. Some improvement in retail investor base has been noted over the last year; further efforts for bringing about growth in this area are on-going. During FY17, performance of most funds featured in first and second quartiles with some weakening in the first five months of FY18; management expects performance to be recouped in full year FY18. As one of the key rating parameters, JCR-VIS will continue to monitor the performance of assets under management across different asset classes over time.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

JCR-VIS Reaffirms Entity Ratings of Matco Foods Limited at A-/A-2

Karachi, January 01, 2018 (PPI-OT):JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Matco Foods Limited (MFL) at ‘A-/A-2’ (Single A-Minus/ A-Two). Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on April 4, 2017.

Current ratings reflect MFL’s adequate liquidity profile and capitalization levels. The rating incorporates MFL’s position as one of the leading rice exporters in the country. In the past few years, rice exports remained highly competitive amidst availability of subsidized Indian rice in international markets making it relatively difficult for Pakistani exporters to retain market share. Nonetheless, as per the latest regulation imposed by European Union (EU), import of Basmati rice containing Tricyclazole above a specified threshold level will not be accepted. Given this recent development in the international market, MFL expects to capitalize on this opportunity resulting in higher exports.

During FY17, overall sales of the company grew by 10.5% and reached Rs.6b mark; growth in sales was largely a function of higher international prices. Although majority sales of MFL comprise exports, local sales have also contributed a significant proportion to the topline. Nevertheless, country wise concentration in sales of MFL is on the higher side. Given recovery in international prices, the company is projecting improvement in margins and overall profitability, going forward. MFL also anticipates higher profitability levels supported by its recent rice glucose venture.

With improved margins, fund flow from operations (FFO) was notably higher in FY17 translating into improved debt servicing coverage levels. With borrowings primarily short term in nature and the company carrying a sizeable amount of inventory/receivables, its ability to retire debt in a timely manner is considered adequate. However, future trend in this respect will be closely tracked. In order to fund expansion of its rice glucose plant and installation of its new rice mill, MFL plans to procure additional debt and equity through issuance of shares by Initial Public Offering (IPO). Developments in this regard are yet to be seen.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk