PACRA Maintains Broker Management Rating of Amanah Investments Limited
Amanah Investment Limited (“AIL” or the “Company”) mainly provides equity brokerage services with an emphasis of trading only in a Shariah-Compliant manner and operating on the Islamic principles of trading. The Company expanded brokerage operations for the public and initiated client on-boarding in the year 2020. Previously, AIL was focused only on running its Propriety Book. Since, AIL emphasizes trading only in a Shariah-Compliant manner, the Company will have the privilege of capturing a niche market, however, the Company will not be able to deal in MTS, MFS, and other leverage-based products. The internal controls and organizational structure are commensurate with the size of the business. The control environment could be strengthened with the formation of an independent internal audit department and with the implementation of board approved policies. For client servicing, the Company has in place a mechanism for resolution of client grievances, order recording and reporting; however, a customized online trading platform could be considered to improve the client experience. The Company may consider establishing a research department which would aid in enhancing client relationships and would help in the on-boarding of corporate clientele. The Company has an adequate governance framework which may be enhanced through the inclusion of independent board members resulting in an increased effectiveness of the board level committees. The assigned rating takes comfort from the business acumen of the primary sponsor. The Company has earned a brokerage revenue of ~PKR 4mln in FY22 as compared to ~PKR 6mln in FY21. The decline came on the back of falling market volumes. The Company has earned ~PKR 12mln in terms of dividends which has supported the total operating revenue. The Company manages a proprietary book with a market value of ~PKR 13mln at end-Jun’22 which has exposed the bottom line to market volatility as seen by loss after tax of ~PKR 43mln in FY22 (SPLY: ~PKR 75mln - Profit). The loss on proprietary book, although unrealized, have left its impact on the Company’s equity which stands at ~PKR 179mln at end-Jun’22 (SPLY: ~PKR 221mln). The topline is concentrated in a few clients; however, the Company has some initiatives in progress to improve the client base. The Company intends to remain debt free for Shariah Compliance which is an encouraging factor.
The ratings would remain dependent on the management’s ability to strengthen the revenue base by augmenting consultancy and advisory services. Retaining market share and sustaining profitability from core operations remain critical. Meanwhile, upholding strong internal controls and diligent monitoring of risks is important.
Amanah Investments Limited is TREC holder of the Pakistan Stock Exchange Limited and was incorporated under the Companies Ordinance 1984 in 2005 as a public unlisted company. The majority of shares are owned by Mr. Abdul Wahab Omar who owns 44.1% of the ownership and acts as the primary sponsor, as well as the CEO of the company. The remaining shares are held by family members of Mr. Abdul Wahab Omar.