Grays Leasing Limited was incorporated as a public limited company in 1995 and commenced operations in 1997. Classified as a non-banking finance company, Grays Leasing is engaged in leasing business in Pakistan, with its registered office situated in Lahore. The firm is listed on the Pakistan Stock Exchange under the moniker GRYL. It has two associated companies, both in the sporting goods industry, which collectively hold more than 50 percent shareholding of the firm. GRYL's last available pattern of shareholding, as of 30 June, 2016, is provided below.
GRYL mainly offers financial leasing services, such as car leasing. As of June 30, 2016, the firm had roughly Rs401 million worth of net investment in financial lease. In recent years, sectors representing major share in GRYL's lease-finance disbursements included textile and allied industries, trading business, leather and footwear, transport and communications, and individuals. All of the firm's leasing exposure is in the private sector. In FY16, about 83 percent of the firm's net investment in finance lease was made in corporates, with the remaining going to individuals.
As per company information, the company's license expired back in 2010 as it could not meet the minimum equity requirement to continue with its leasing business. However, after the SECP's amendments to applicable NBFC regulations recently, the company has been allowed to continue its leasing business, but as a non-deposit-taking NBFC, as GRYL was able to meet the lower minimum equity requirement of Rs50 million.
GRYL's leasing license, which stood expired for many years, has now been renewed till 15 May, 2019. The company's sponsors have expressed their commitment to support the firm "financially and operationally" to keep it going on a going-concern basis.
Recent financial performance
It has been a downhill journey for the firm since its license expired in 2010 and its business remained mired in uncertainty for the following few years. Between FY11 and FY16, the firm has had four loss-making years. Even though the extent of losses had been curtailed as of FY16, the firm's top line woes have worsened a great deal - the Rs10.2 million revenues in FY16 were a third of what they were back in FY11.
Bulk of the GRYL top line comes from its financial leasing business. That business has been hurt over the years as the firm could not substantially increase its net investment in finance lease. That in turn could be attributed to the uncertainty whether the firm will continue its business, which resulted in difficulties in raising borrowing from commercial sources. In recent years, GRYL has had to rely on its associated companies for fresh funding.
Meanwhile, the firm's expenses naturally went down in line with low business generation. Total expenses declined from Rs73 million in FY11 down to Rs10 million in FY16. That's mainly because of lower financial charges and continuing reversals in provisions for doubtful receivables in recent years. That has obviously helped the firm curtail its net losses towards the end of the income statement.
But there is a limit after which expenses cannot be reduced - the fixed costs remain. That has shown itself in recent years where just the administrative expenses came in more than the entire top line figure. In the latest fiscal, FY16, the administrative expenses totaled Rs11.4 million, higher than the Rs10.2 million top line.
Latest financials
For a change, the nine-month period ended March 31, 2017 showed a roughly 4 percent top line increase for the firm. However, it wasn't substantial enough to signal a change in fortune. As expenditures grew by over 9 percent year-on-year in 9MFY17 on the back of lower lease-loss reversals, the top line gain easily dissipated and gave way to a net loss that was higher than the entire FY16 net loss figure.
Stock performance
In the year-to-date, the GRYL scrip has outperformed the broader index. But perhaps there isn't much to read there because the stock attracts a thin amount of trading. Average daily volumes in the year till June 22, 2017 stood at roughly 15,000 shares. During this period, the scrip recorded a high of Rs12.09 on January 26, 2017 and a low of Rs3.87 on June 7, 2017, which continued unchanged for about a month. The stock closed at Rs5.9 per share on June 22.
Outlook
GRYL looks set to close this fiscal, too, on a downbeat note of a net loss. But now that the firm has finally gotten hold of its leasing license that was previously lost in 2010, it should give confidence to both the customers and the commercial creditors. The macro environment, with continually low interest rate and economic growth making a comeback, are conducive for leasing of machinery as well as vehicles.
However, the firm faces a challenging lease-finance market, where commercial banks, being a one-stop shop for various financial needs of individuals as well as corporates, rule the roost. Like other non-banking leasing firms, GRYL would do well to focus on SME segments that are not served well or not served at all by bankers. But to increase disbursements substantially, it is critical for the firm to raise fresh financing from commercial sources.
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GRYL: Pattern of shareholding (as on June 30, 2016) Shares % of total
held shares
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Directors and their spouses and minor children 4,705,600 21.89%
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Associated companies, undertakings, related parties
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Anwar Khawaja Industries (Pvt.) Limited 3,739,603 17.39%
Grays of Cambridge (Pakistan) Limited 7,999,999 37.21%
Other companies, corporate bodies, trust, etc. 129,112 0.60%
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General public:
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Local 4,898,950 22.79%
Foreign 26,736 0.12%
Total 21,500,000 100%
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Source: Company accounts
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GRYL: Financial snapshot
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Rs (000) FY16 FY15 FY14 FY13 FY12 FY11
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Operating results
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Revenues 10,222 10,986 10,246 9,206 25,930 30,610
Financial and other charges (2,023) (2,127) (1,105) (1,426) (8,631) (28,125)
(Provision)/Reversal for doubtful receivables 3,408 1,474 6,650 (10,595) (2,897) (15,493)
Profit/(loss) after taxation (714) 102 (1,075) 3,439 (3,523) (44,170)
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Financial position
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Paid-up share capital 215,000 215,000 215,000 215,000 215,000 215,000
Shareholders' equity 74,626 75,248 75,140 75,349 71,910 75,433
Borrowings 25,000 25,000 15,000 4,000 12,383 74,550
Net investment in finance lease 400,993 384,207 383,630 373,463 424,714 547,058
Total assets 248,032 234,461 223,832 214,753 243,381 388,087
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Financial ratios
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Profit/(loss) after tax over revenue -7% 1% -10% 37% -14% -144%
Return on shareholders' equity -1% 0% -1% 5% -5% -59%
Income/expense ratio 0.76 0.75 0.83 0.76 0.93 0.42
Interest coverage ratio (0.91) (1.80) (1.61) 2.11 (1.23) (2.71)
Earning/(loss) per share (0.03) 0.005 (0.05) 0.16 (0.16) (2.05)
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Source: Company accounts
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GRYL: Latest financials
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Rs (000) 9MFY17 9MFY16 Chg
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Revenue 7,935 7,644 3.8%
Income from operations 7,314 7,149 2.3%
Other income 621 495 25.5%
Total expenses (8,338) (7,622) 9.4%
Profit before tax (403) 22 -1927.3%
Profit/(loss) after tax (820) (289) 183.5%
Earning/(loss) per share-Rs (0.04) (0.01) 300.0%
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