Leasing Companies: SIGMA LEASING CORPORATION LIMITED - Year Ended 30th June 2005

The profile of this nascent Leasing Company emerges as the one which facilitates the lessee by providing cash flow benefits, an alternate source of funding, avoidance of dilution of share ownership, time efficiency and above all tax efficiency - the attributes embedded in the 9th Annual Report of the Company.
Sigma Leasing Corporation has been constantly adding value to the shareholders wealth and maintaining assets without infection. With solid base of clientele, realistic pricing of lending and diversity in sectoral funding, the company is poised to engage itself to avail of the opportunities being made available by the growing economy.
At the same time its solid business processes will support it to untangle from the twists of unforeseen challenges.
During the year under review, the company posted highest gross revenue and lease income figures. However due to rising finance cost the company's pretax profit were lower at Rs 35.07 million as compared to Rs 42.33 million posted in the previous year. Nevertheless dividend payout is higher at Rs 26 million (FY 2003-04: Rs 20.00 million).
Sigma Leasing Corporation Limited has entered into the ninth year of operation. It was incorporated in the province of Sindh on April 11, 1996 as a public limited company and received Certificate of Commencement of Business on January 27, 1997.
It is a billion rupee company in terms of assets as it has total asset base of Rs 1.154 billion. Its net investment in finance lease increased substantially to Rs 891.13 million from Rs 746.35 million booked in the preceding financial year (FY 2003-04). It is listed on the Karachi Stock Exchange since 1997. Its registered office is located in the prime valuable real estate off Shahrah-e-Faisal Karachi.
On 9th September 2005, the closing price of its share was quoted at Rs 19 per share carrying 90% premium over the par value. During the last one year market value of the share remained within a narrow price band of Rs 18 and 19 per share. It has quite attractive profit distribution profile both in terms of dividend rate and regular payouts.
During FY 2004-05, the company's gross revenue amounted to Rs 91.48 million as against Rs 83.53 million registering 9.5% growth over the preceding year's. Gross Revenue figure is the record highest and same is the performance of lease income. Lease income accounted for 70.6% (2003-04: 74.61%).
Administrative and operating expenses increased by relatively modest amount of Rs 2.34 million possibly because of inflationary trend coupled with growing business trend.
Financial charges were higher by Rs 13.24 million over previous year's. The quantum of borrowing increased and interest rates also kept on increasing so financial charges were on the higher side.
Credit goes to the leadership in the company that it is managing its portfolio without requirement of any provisions for doubtful receivables or over due rentals.
The directors rightly emphasise about high quality of the company's assets and strict adherence to an effective implementation of the policies and procedures. They have successfully maintained high quality asset and throughout their portfolio is free from all sorts of infections.
The other glaring attribute of the company's business process is its management of policies and risk assessment. In a competitive market one may lose sight of perfecting the risk assessment.
But in the case of Sigma Leasing it is worth studying the strategy of not being trapped in defaults. Such a perfection may not be visible in many a leasing companies which are just below 10 year old. Although this is nine year old entity but its leadership generally and the Chief Executive particularly brings the experience and skill of banking and finance of several decades providing service to various communities both inside the country and abroad.
One of the tools to hedge against risk is adequate diversity in business. The Ninth Annual Report of the company will prove reservoir of knowledge for the academia in the field of finance and its different phases such as choice of asset to lease, eligibility of the proposed lessee, criterions, credit evaluation and approval process, disbursement transfer of assets on maturity of the lease.
Above all it is important and interesting how far a student of finance or a business professional to know as to how the company prices its lending as leasing using KIBOR.
The beauty of the report is the clear dissemination of information illustrated graphically, using diagram and tables, arrangement of contents, quality of paper choice of colour, even size of texts and fonts - simply superb.

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Performance Statistics                     (Million Rupees)

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30th June                                 2005         2004

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Share Capital-Paid-up:                  250.00       200.00

Reserves:                                37.96        33.71

Shareholders Equity:                    287.96       233.71

Surplus on Revaluation of Fixed Assets:  17.61        17.64

Lease Key Money Deposits:               144.76       108.04

L.T. Debts:                             192.43       174.66

L.T. Certificates of Investment:         11.78        11.53

Deferred Tax Liabilities:                42.60        40.35

Current Liabilities:                    457.67       456.79

Fixed Assets:                            39.57        36.76

Net Investment in Finance Lease:        559.14       458.68

Deferred Cost:                           10.75        16.75

Current Assets:                         545.35       530.53

Total Assets:                         1,154.81     1,042.72

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Revenue, Profit & Pay Out

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Lease Income:                            64.54        62.32

Mark-up on Deposits/Placement:            6.45         3.02

Other Operating Income:                  20.49        18.19

Gross Revenue:                           91.48        83.53

Admin & Operating (Expenses):           (14.95)     (12.61)

Financial (Charges):                    (35.46)     (22.22)

(Provision) for Potential Lease Losses:      -       (0.37)

(Amortisation) of Deferred Cost:         (6.00)      (6.00)

Total (Expenditure & Provision):        (56.41)     (41.20)

Profit Before Taxation:                  35.07        42.33

Profit After Taxation:                   31.21        33.17

Earning Per Share (Rs):                   1.50         1.66

Dividend:                                26.00        20.00

Share Price (Rs) on 09/09/05:            19.00            -

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Financial Ratios

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Price/Earning Ratio:                     12.67            -

Book Value Per Share (Rs):               11.52        11.69

Price Book Value Ratio:                   1.64            -

Debt/Equity Ratio:                       39.61        41.59

Current Ratio:                            1.19         1.16

Lease Income/Total Income (%):           70.55        74.61

Net Profit/Total Income (%):             34.11        39.72

R.O.E. (%):                              10.84        14.19

R.O.A. (%):                               2.70         3.18

R.O.C.E. (%):                             4.48         5.66

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