PACRA Maintains Broker Entity Ratings of Trust Securities & Brokerage Limited
Trust Securities & Brokerage Limited’s (“TSBL” or “the Company”) core product portfolio centers around equity brokerage services, while its renown in the commodity brokerage space has improved significantly over the recent years. TSBL enjoys an adequate market share of ~2% whereas the clientele is diversified between corporate/Institutional and Retail/HNWIs. Challenging economic conditions in Pakistan, including political uncertainty, high inflation, and volatile interest rates, have negatively affected the brokerage industry and investors' sentiments, particularly in FY23, leading to a decrease in market activity level and profitability. During 9MFY23 TSBL’s revenue declined by 29% to ~ PKR 121mln (SPLY: ~PKR 171mln). However, the Company reported a PAT of ~PKR 22mln when compared to the net loss (~PKR 14mln) during SPLY. This improvement can be attributed primarily to a prudent control of operating expenses as well as an increase in other income. The Company has a low-leveraged capital structure. The Company has an adequate equity base of ~PKR 312mln at end-Mar’23 (SPLY: ~PKR 289mln). The market risk is minimal due to the Company’s limited investment in equity securities amounting to ~PKR 27mln. The financial performance has shown a decent Y-o-Y improvement after the takeover by the incumbent sponsors. The new ownership has been effective in driving growth in the brokerage business. Additionally, TSBL has a well-developed organizational structure that ensures efficient operations, clear lines of responsibility, and effective communication within the Company. A well-structured company is better positioned to adapt to changes in the market and maintain its competitive edge. The Company has a strong governance framework supported by the presence of independent directors and board-level committees. The management is seasoned, and the control framework is deemed satisfactory, primarily attributed to the presence of a dedicated risk management department within the Company. Moreover, TSBL has opted to outsource its internal audit department, which bodes well for the Company's control framework. The ratings draw comfort from the improvement to Category 'A' of the external auditors of the Company. As a part of long-term strategic plans, TSBL will be leveraging its growing market share in PMEX to aid the Company’s topline going forward. The improvement of the technological platform and geographical diversification is also under consideration.
Going forward, the company will focus on revenue diversification, geographical expansion, and enhancement of PSX and PMEX market share. Simultaneously, it is imperative to uphold robust internal controls, retention of key management personnel, and diligently monitor risks.
Trust Securities & Brokerage Limited holds a TREC license from the Pakistan Stock Exchange and is also a member of the Pakistan Mercantile Exchange Limited. The Company was established in 1993, but the current owners took over in 2017. Mr. Junaid Shehzad Ahmed, with a wide-ranging business presence in both Pakistan and overseas, primarily owns the company. The board of directors consists of seven members, including two independent directors, three non-executive directors, and two executive directors. Mr. Abdul Basit, who has been with TSBL for the past 28 years, serves as the CEO and possesses expertise in various areas such as corporate, business, Company laws, as well as SECP and NCCPL rules and regulations.