JS GLOBAL CAPITAL LIMITED - Analysis of Financial Statements Financial Year 2008 - 2001 H 2010
JS Global Capital Limited (formerly JS Capital Markets Ltd), with long-term rating of AA by PACRA, is a subsidiary of Jahangir Siddiqui & Company Limited. The company started its formal operations in September 2003.
The principal activities of the company are share brokerage, money market and foreign exchange brokerage, equity research, advisory and consultancy services. It is a publicly listed company which trades on the Karachi Stock Exchange (Stock ticker: JSGCL) and one of the top three equity brokers in Pakistan. JSGCL provides financing and advisory services to its parent group, JS Group.
In 2006, Global Investment House KSCC, a leading Kuwait-based regional investment bank in the Middle East invested USD 37 million in JS Capital Markets through an acquisition of 42.8 percent equity stake. As a result, the company was renamed as JS Global Capital Limited and the equity of the company was raised to USD 47 million. JS Global Capital has a capital adequacy of USD 762 million, which is the highest in the country for a stock brokerage, business financing and advisory services company.
The company has recently finalized an agreement with Mubasher of Dubai to introduce the next generation of online trading system in Pakistan. The Mubasher system will offer a fast, secure and simple online service to investors due to its foreign design and operation under the FIX protocol. The inclusion of the Dubai and Abu Dhabi markets would make the JS Global platform the first multi-exchange online environment in Pakistan offering the largest range of market options to investors.
=====================================
COMPANY SNAPSHOT
=====================================
Symbol JSGCL
-------------------------------------
Nature of Business Brokerage
Current Rate Rs 55.03
Turnover 4152
Outstanding Shares 50000000
Market Capitalization 2751500000
EPS Rs 3.75
=====================================
STOCK MARKET'S PERFORMANCE
Once the threat of default in the international debt markets was averted and with the shoring up of Pakistan's foreign currency reserves due to the assistance of an IMF led program and the quarter on quarter improvement in macro-economic indicators, the stock market began to witness a substantial recovery. From the time it touched the trough level of 4800 points in January 2009 the KSE-100 is up 94%. The outgoing quarter alone has provided a return of 30.5% with an average trading volume of 189 million shares a day. However country's law and order situation and other political issues kept on rendering the market volatile for the local as well as foreign investors.
RECENT PERFORMANCE 2001 H 2010Company has reported a profit before tax of Rs 266.067 million and profit after tax of Rs 187.369 million for 1H10 as compared to loss before tax of Rs 433.798 million and loss after tax of Rs 268.049 million for the 1H09 showing a substantial improvement in earnings. Earning per share for the six-month period was Rs 3.75 per share as compared to loss per share of Rs 5.36 per share for 1H09.
FINANCIAL PERFORMANCE
The overall profitability of the company declined in FY09 due to low economic activity in the share market as well as in the equity and capital market. The brokerage and investment banks' profitability was severely affected as a result, huge decline was observed. First the operating revenue which decreased by 66.9% in FY09.
Coming onto profit after tax and profit before tax, we observed PBT declined from Rs 740m in FY08 to Rs 273m in FY09. The basic reason was due to low revenues for the period of FY09. Hence we saw a decline in PBT/revenue ratio as well as in PAT/revenue. For PBT/revenue it decreased from 55.11% in FY08 to 44.91% in FY09 and for PAT/revenue it decreased from 65.35% to 59.48% in FY09. Considering the PAT alone we can see a decline of about 67%, even though the administrative expenses marginally decreased however it didn't impact enough to improve the profitability of the firm.
Moving to ROA and ROE, the same trend can be witnessed. ROA nearly halved in FY09 reaching to just 5.57% in FY09 whereas ROE showing a bigger decline to fall to 6.95% in FY09 from 19.02% in FY08. For the period of 1Q10, we saw the same performance as of FY09. The ROA and ROE showed a considerable increase, posting 3.53% and 5.24% growth respectively compared to 5.57% and 6.25% in FY09. This performance was also seen in PAT/revenue and PBT/revenue ratios, where the ratio showed an incredible increase of 128% and 164%, owing to the fact that the company is on a good performance track for they FY10 by controlling its expenditures and posting considerable profits.
1H10, the operational performance has improved compared to 1H09. ROA and ROE respectively showed healthy ratios as it posted 5.16% and 6.10%. The main factor behind this is high increase of operating revenue, in which the primary element remains Brokerage and Operating income mounting to Rs 1.69bn. This, coupled with lower total assets resulted in higher ROA. One area, which can be clearly pointed out, is the cash and bank balances, which reduced to Rs 4.21bn from Rs 8.14bn, as the current account and term deposit both reduced by substantial amounts.
========================================================
Cash with banks: 1H'10 1H'09
========================================================
Current accounts 4,291,319 13,066,786
Term deposit receipts 100,000,000 500,000,000
========================================================
The liquidity position has dramatically improved for the past year of FY09. There has been a huge increase of the current ratio from 2.33x in FY08 to 8.90x in FY09. There are two reasons for this huge increase in the current ratio. First, there has been a considerable increase in cash and bank balances, which has increased by 300%. Second, there has been a rise in short-term investments as well, which mounted to Rs 1095m in FY09. Moreover on the base side, there has been a decrease in current liabilities' section where the provision for tax has been reduced to Rs 76m from Rs 115m. In 1Q10, the company cut down on its excessive Current Ratio by reducing it to 2.70x from 8.90x in FY09. And secondly increasing its revenue/expenses ratio from 3.18x in FY09 to 4.18 in 1Q10. The decrease in current ratio is attributed to an increase in proposed dividends, which resulted in Rs 50bn for the current year. The second reason is increase of provision of tax, which increased from Rs 76m to Rs 12.3bn for 1Q10.
========================================================
1Q'10 FY'09
========================================================
Proposed dividend Rs 500,000,000 -
Provision for taxation Rs 123,433,887 Rs 76601451
========================================================
Current ratio for 1H10 showed a huge increase from 2.70x in 1Q10 to 6.38x in 1H10. This is identified as the Current Liabilities decreased to Rs 554m in 1H10 from Rs 1.69bn in 1Q10. Two areas have resulted in such decrease. First, the proposed dividends which were announced for the 1Q10 was eliminated and secondly, the creditors' accrued expenses and liabilities were substantially reduced to Rs 397m from Rs 1.071bn. Main part is explained by the decreased credits for the sale of shares on behalf of clients reduced from Rs 1.010bn in 1Q10 to Rs 349m in 1H10. The debt management ratios showed a significant performance in FY09. The company has maintained a nil gearing ratio for the current year. The debt that had been outstanding for the company has been repaired; however incurred certain amount of the financial charges on its other liabilities. D/E and D/A became zero for the year FY09.
In 1Q10, the company maintained and improved its debt management ratios. This could be observed by the nil gearing ratio in 1Q10.
The times interest ratio has greatly increased from 10.42x in FY08 to 24.50 in FY09. This was due to decrease in the financial charges in the current year. It has decreased by 86% in FY09 and EBIT increased by 50.5% to Rs 478.5 million in 2007 to Rs 317.8 million in 2006. Lower financial charges are mainly due to lower mark-ups on running finance. The company increased its interest coverage ratio from a mere 25.0 in FY09 to 245.5 in 1Q10, mainly attributing to the increase in the EBIT from Rs 81,485,679 in FY09 to Rs 217,193,285 in 1Q10 and also a decrease of interest expense as the company had nil gearing ratio. In 1H10, the debt ratios further improved from 1Q10, as the debt to equity and debt to assets condensed to 0.15 and 0.18, mainly attributing to decrease in the liabilities mentioned above. Augmenting to this, the company has still maintained its nil gearing ratio, as no long-term debt is being issued.
The earnings per share witnessed a major decline in FY09. EPS decreased from Rs 12.18 in FY08 to Rs 4.12 in FY09. The basic reason behind this is, decline in the revenue for FY09. The trickle down effect resulted in the lower profits for the current year, which greatly reduced the EPS for the current year. And also because of a number of shares outstanding increased from 3,571,450 to 50,000,000 in FY09. However in 1Q10 the company is able to increase its EPS from Rs 1.37 in FY09 to Rs 3.31 in 1Q10. This was mainly because of the increase in revenue and also increase in PAT in 1Q10, which touched Rs 165.279 million.
The 1H10 saw an increase in the EPS to Rs 3.75, mainly due to the increase in the operating revenue, resulting in the increase in PBT. Thus the company has been able to earn a considerable return on its share investment.
JSGCL's book value per share showed significant decline in the period under study. Book value declined from Rs 91.9 in FY08 to Rs 65.48 in FY09. This is because of the increase in the shares outstanding, however, not a proportionate increase in the equity section. The 1Q10 saw a similar decline in book value/share as the ratio decreased from Rs 65.48 in FY09 to Rs 59.62 in 1Q10. This was because of a decrease in the net equity as the unappropriated profit decreased to Rs 688m in 1Q10.
FUTURE OUTLOOK
Capital markets have been affected in the recent years because of the economic slowdown. However, government policies are likely to enhance investment opportunities. These could be ease of monetary policy, reducing interest rate and a higher tax collection from government might lead to positive approach for investors.
In its annual outlook, the IMF expects the global economy to sustain its economic recovery, forecasting a global GDP growth of 3% in 2010, after contracting by about 1 percent in 2009. Most macroeconomic data coming out of Pakistan ranging from domestic consumption to investments is still pointing towards weak economic growth in FY10 and beyond. This will probably undermine the financial sector's asset quality recovery and in turn will apply a bit of downward pressure to the capital market recovery.
More issues do plan to hinder the growth for JSGCL, because of the current situation of load shedding and debt on KESC and the cost of furnace oil pushing upwards, the other industries do face non-conducive environment to progress, thus resulting in lower confidence for the investors to invest. However, the markets are still profitable and JSGCL, with their expertise and skills are still managing to be the market leaders.
===============================================================================================================
JS GLOBAL CAPITALS - FINANCIALS
===============================================================================================================
Balance sheet 2008 2009 1Q'10 1H'10
---------------------------------------------------------------------------------------------------------------
SHARE CAPITAL AND RESERVES
---------------------------------------------------------------------------------------------------------------
Issued, subscribed and paid up capital 357,145,500 500,000,000 500,000,000 500,000,000
Share Premium 1,952,959,400 1,810,104,900 1,810,104,900 1,810,104,900
Unappropriated profit 995,796,550 1,023,463,793 688,742,517 710,833,025
Unrealized loss on remeasurement
of securities at fair value (23,686,148) -34,416,500 -17,685,526 52,627,423
Total Shareholder's Equity 3,282,215,302 3,299,152,193 2,981,161,891 3,073,565,348
---------------------------------------------------------------------------------------------------------------
NON CURRENT LIABILITIES:
---------------------------------------------------------------------------------------------------------------
Advance against issue of shares - - - -
Deferred taxation 1,440,366 - - -
Total Non Current liabilities 1,440,366 - - -
---------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
---------------------------------------------------------------------------------------------------------------
Running finance under mark-up agreements-secured - - 0 0
Creditors, accrued expenses and other liabilities 2,264,113,388 328,816,078 1,071,636,976 397,925,600
Proposed Dividends - - 500,000,000 0
Interest and mark-up accrued 15,067,150 - 29,423
Provision against taxation 115,138,087 76,601,451 123,433,887 156,525,391
Total Current liabilities 2,394,318,625 405,417,529 1,695,070,863 554,480,414
Total Liabilities 2,395,758,991 405,417,529 1,695,070,863 554480414
Total Liabilities and Shareholder's Equity 5,677,974,293 3,704,569,722 4,676,232,754 3628045762
---------------------------------------------------------------------------------------------------------------
NON-CURRENT ASSETS:
---------------------------------------------------------------------------------------------------------------
Property, plant and equipment 72,321,711 57,128,927 51,604,125 46,117,502
Intangible assets 21,573,291 21,036,651 23,500,000 23,500,000
Long term loans, advances and deposits 4,527,628 3,892,294 4,286,142 4,109,609
Long term investment - advance against equity - - 0 15,381,755
---------------------------------------------------------------------------------------------------------------
CURRENT ASSETS:
---------------------------------------------------------------------------------------------------------------
Short term investments 708,110,076 1,095,008,267 1,554,769,853 2,080,609,685
Trade debts - unsecured, considered goods 1,982,717,833 1,542,861,489 1,572,975,431 860,779,442
Loans, advances, prepayments,
and other receivables 2,003,902,349 9,496,548 171,972,003 70,262,765
Advance tax 146,712,990 68,395,460 79,764,007 105,347,795
Receivable under reverse
repurchase/CFS transaction 530,106,289 - 488,273,050 -
Cash and bank balances 208,002,126 814,149,824 695,143,110 421,937,209
Total current assets 5,579,551,663 3,608,356,633 4,582,643,190 3,538,936,896
Total Assets 5,677,974,293 3,704,569,722 4,676,232,754 3,628,045,762
---------------------------------------------------------------------------------------------------------------
PROFIT AND LOSS ACCOUNT 2008 2009 1Q'10 1H'10
---------------------------------------------------------------------------------------------------------------
Operating revenue 886,845,595 316,377,931 93,304,209 174835165
Income from reverse repurchase/CFS transactions 157,055,883 45,207,460 0 -
Capital gain on sale of investments 92,281,828 89,519,070 24,686,992 52228754
loss on revaluation of investments
carried at fair value (3,673,229) 8,138,612 10,859,284 21129868
Administrative and operating expenses (458,544,709) (342,189,640) -86,848,921 -186191785
other operating income 126,020,117 224,289,123 175,191,721 211192457
financial charges (59,871,615) 8,148,508 -884,066 -1806492
Profit before taxation 740,113,870 273,152,774 212,067,080 266066634
taxation - current (115,138,087) 76,601,451 -46,832,436 -79923940
prior (968,577) 5,906,913 0 -
deferred 126,919 15,595,583 44,080 1226538
Profit after taxation 624,134,125 206,239,993 165,278,724 187369232
Basic/Diluted Earnings per Share 12.48 4.12 3.31 3.75
---------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS 2008 2009 1Q'10 1Q'11
---------------------------------------------------------------------------------------------------------------
EARNING RATIOS
---------------------------------------------------------------------------------------------------------------
ROA 10.99% 5.57% 3.53% 5.16%
ROE 19.02% 6.25% 5.54% 6.10%
PAT/Revenues 55.11% 44.91% 128.27% 75.49%
PBT/Revenues 65.35% 59.48% 164.58% 107.20%
---------------------------------------------------------------------------------------------------------------
LIQUIDITY RATIOS
---------------------------------------------------------------------------------------------------------------
Current Ratio 2.33 8.90 2.70 6.38
Revenue/Expenses 2.18 3.18 4.18 5.18
- - 5962.32% -
---------------------------------------------------------------------------------------------------------------
DEBT MANAGEMENT RATIOS
---------------------------------------------------------------------------------------------------------------
Debt to Equity 2.86 0.00 - 0.18
Debt to Assets 0.42 0 - 0.15
Interest coverage ratio 10.42 24.5 246 246.50
---------------------------------------------------------------------------------------------------------------
MARKET RATIOS
---------------------------------------------------------------------------------------------------------------
Earnings/Share 17.48 4.12 3.31 3.75
Book value/Share 91.9 65.9 59.62 61.47
===============================================================================================================
COURTESY: Economics and Finance Department, Institute of Business Administration, Karachi, prepared this analytical report for Business Recorder.
DISCLAIMER: No reliance should be placed on the [above information] by any one for making any financial, investment and business decision. The [above information] is general in nature and has not been prepared for any specific decision making process. [The newspaper] has not independently verified all of the [above information] and has relied on sources that have been deemed reliable in the past. Accordingly, the newspaper or any its staff or sources of information do not bear any liability or responsibility of any consequences for decisions or actions based on the [above information].
Comments
Comments are closed.