PACRA Maintains Entity Ratings of Optimus Capital Management (Pvt.) Limited

Lahore, April 11, 2023 (PPI-OT):Optimus Capital Management (Pvt.) Limited (“Optimus Capital” or “The Company”) is primarily engaged in the provision of equity brokerage services while the income from advisory and consultancy also supports the topline.

The Company also offers fixed-income brokerage through its associated company – Optimus Markets (Pvt.) Limited. The Company has a reasonable market share with the client base tilted towards corporate and institutional investors which constitutes ~76% of the brokerage income earned during the 1HFY23. However, it is notable that the Company has increased its client base compared to Dec’21.

The business model of equity brokers is inherently prone to market volatility. Rising interest rates, political uncertainty, and increasing inflationary pressure during CY22 have impeded investors’ sentiments, adversely impacting volumetric activity at PSX. Consequently, the commission on equity brokerage suffered a decline of ~74% during 1HFY23 as compared to 1HFY22.

The Company earned revenue from equity brokerage of ~PKR 30mln in the 1HFY23 (1HFY22: ~PKR 117mln) whereas for FY22 it stood at ~PKR 148mln (FY21: ~PKR 119mln). On the other hand, the Company earned markup on short-term investments of ~PKR 11mln in addition to consultancy income of ~PKR 6mln during 1HFY23 providing the necessary support.

The Company suffered a loss after tax of ~PKR 13mln for 1HFY23 mainly due to a decline in core income. The Company has an adequate equity base of ~PKR 333mln at end-Dec’22 (Jun’22: ~PKR 347mln). The rating takes comfort from a low-leveraged capital structure. The ongoing volatility of the equity market may impact the commission revenue going forward.

The market risk is negligible as the major portion of the access liquidity is parked in Government Securities and Mutual Funds. The Company has a lean organizational structure with most of the heads reporting to the CEO.

The rating incorporates seasoned management and an adequate control framework which may be improved further with the presence of a dedicated risk and compliance department. Moreover, the governance framework may be enhanced further by increasing the board size, induction of independent directors, segregating the position of CEO from the Chairman of the Board, and increasing oversight.

Going forward, improvement in core income, sustainability of market share, and profitability remain critical. Meanwhile, upholding sound internal controls, improvement of governance structure, retention of key management personnel, and diligent monitoring of risks is important.

For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425