January 18, 2019 (MLN): JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the entity ratings of Topline Securities Limited (TSPL) at ‘A-/A-2’ (Single A-Minus/A-Two). Outlook on the assigned ratings is ‘Stable’.
The assigned ratings incorporate TSPL’s strong operating model and low exposure to credit and market risk given high proportion of Institutional Delivery System in overall volumes and no proprietary book.
Ratings also reflect company’s healthy liquidity profile and capitalization indicators and existing market position. However, ratings are constrained by cyclical nature of the brokerage industry.
Topline has historically focused on high margin business and operates on a variable cost structure. This has resulted in limited increase in TSPL’s cost to income ratio vis-à-vis other industry players.
Currently, brokerage income represents around nine-tenth of the company’s revenues. However, improved diversification in revenue streams is expected given strong corporate advisory pipeline.
Moreover, improved liquidity and increase in benchmark rates is expected to translate into healthy growth in treasury income. Liquidity and capitalization indicators have improved on a timeline basis and are considered sound.
