The outstanding performance of First Habib Modaraba has been widely acknowledged. For being one of the best performing Modaraba in the sector, for year 2005, the Modaraba Association of Pakistan awarded to FHM "Excellence Awards."
The two decade journey towards the excellence is all the more commendable in the background of severe constraints of resource mobilisation, fierce competition from commercial banks and leasing companies, shortage of human resource tailored for Islamic finance, and above all designing customised financial products not repugnant to Sharia'a. However the commitment is there among the FHM workforce and leadership.
According to the FHM Directors Report, "while remaining in core business of leasing, we will continue to leverage innovative business models that add value for our customers and certificate holders. The modaraba has maintained highest equity in the modaraba sector and its lease portfolio is the highest in its career.
Correspondingly it earned net profit at Rs 141.08 million which is its historic best. Resultantly its Rs 5-certificate has been trading at Rs 7.10 which carries 42% premium over the par value.
For the year 2005-06, the directors proposed cash dividend at 20% as compared to 15% in the previous year.
First Habib Modaraba (FHM) is a perpetual, multipurpose modaraba floated and managed by Habib Modaraba Management (Private) Limited, having its registered office situated at 5th Floor, HBZ Plaza I.I. Chundrigar Road Karachi. It is listed on the Karachi and Lahore Stock Exchanges. The Modaraba is engaged in the business of leasing, Musharaka, Murabaha financing and other related business.
The directors of the Modaraba rejoiced that FHM achieved an excellent result for the year ended June 30, 2006. All segments of the business showed strong performance in a highly competitive market.
The certificate holders equity stands over Rs 1.795 billion. According to the directors, last year FHM recorded the highest equity in the entire Modaraba sector. They hope to maintain the same this year.
The sound financial position and excellent performance of the Modaraba has been also acknowledged by the credit rating agency Pacra as they maintained the rating of the Modaraba ie AA (Double A) for long term and A1+ (A one plus) for short term. The short term rating of A1+ is the highest in Pacra's rating scale. This rating is indicative of a very low expectation of credit risk emanating from very strong capacity for timely payments of financial commitments.
According to Pacra, (as informed by the Modaraba's directors) these ratings reflect the Modaraba's outstanding asset quality, track record of sound profitability emanating from established core operations. Pacra also acknowledges that FHM continues to maintain an infection free lease portfolio, which demonstrates good credit evaluation and effective risk management policies by a competent management team.
From the Annual Report 2006 of the Modaraba one can see that the most of the Directors of the Modaraba are seasoned bankers and reputed professionals of the financial management. Each one of them has experience of between 20 to 50 years and two of them have also experience of foreign. What is more worth seeing from the clippings of pictures of Modaraba office that down the line there is smart and relatively younger management personnel. One would be agreeable that the off balance sheet item ie human resource is the most valuable asset and definitely this is the engine of growth of this organisation. Above all they seem to be committed and dedicated for a noble cause, that is, Islamic Finance.
During the year 2005-06, the Modaraba's lease portfolio amounted to Rs 2.745 billion as against Rs 2.047 billion in the preceding year, showing increase of 34.1%. Significant progress in terms of writing of new leases, were made as approximately Rs 1,720 million were disbursed.
Lease rental collection also improved to Rs 1,201 million as compared to Rs 1,009 million of last year. FHM also maintains robust investment portfolio of marketable securities of listed companies/institutions. On June 30, 2006, this portfolio amounted to 158 million at cost which had carrying value at fair value (market price) of Rs 987 million, about 6.2 times of the cost. The sustainability of the high market value of investment can be seen from banks shares in the investment basket. This is abundant evidence of the competency of the investment group of FHM.
=========================================================
Performance Statistics (Million Rupees)
=========================================================
June 30 2006 2005
=========================================================
Certificate Capital-Paid-up: 504.00 504.00
Reserves: 1,291.31 822.80
Certificate Holders' Equity: 1,795.31 1,326.80
L.T. Debts: 360.30 171.62
Certificates of Musharaka: 14.37 67.30
Security Deposits Against
Assets Leased Out: 188.59 147.88
Current Liabilities: 1,528.84 943.45
Assets Leased Out: 2,744.84 2,047.01
Assets in Own Use: 7.33 4.12
Intangible Assets: 0.21 0.20
L.T. Advances Deposit: 1.41 0.80
Current Assets: 1,133.62 604.92
Total Assets: 3,887.41 2,657.05
---------------------------------------------------------
Revenue Profit & Payout
---------------------------------------------------------
Lease Rentals: 1,200.66 1,008.82
Profit on Morabaha Finance: 5.74 4.80
Other Income: 34.38 19.22
Total Income: 1,240.78 1,032.84
On Lease Out: (945.71) (812.77)
Administrative (Expenses): (24.93) (27.30)
Financial (Charges): (113.39) (79.69)
Total (Expenses): (1,084.03) (919.76)
Modaraba Company's Management Fee: (15.67) (11.31)
Profit For the Year: 141.08 101.77
Earning Per Certificate (Rs): 1.40 1.42
Proposed Profit Distribution: 20.00 15.00
Modaraba Certificate Market
Price (Rs) on 4-12-2006: 7.10 -
---------------------------------------------------------
Financial Ratios
---------------------------------------------------------
Price/Earning Ratio: 5.07 -
Book Value Per Certificate (Rs): 17.81 13.16
Price Book Value Ratio: 0.40 -
Debt/Equity Ratio: 17:83 11:89
Current Ratio: 0.74 0.64
Lease Income/Total Income (%): 96.77 97.67
Net Profit/Total Income (%): 11.37 9.85
R.O.E. (%): 7.86 7.67
R.O.A. (%): 3.63 3.83
R.O.C.E. (%): 5.98 5.93
=========================================================