Pervez Ahmed Securities was incorporated on June 8, 2005 as a single member company and was listed on Karachi and Lahore stock exchanges on June 21, 2007. The principal activities include shares brokerage and trading, consultancy services, equity investments, corporate finance and underwriting. Recently the company has acquired 100% holding, 8.5 million shares of Pervez Ahmed Capital (Pvt) Limited.

RECENT PERFORMANCE Q3, FY08 During the period under consideration, July FY07 to March FY08, the company has shown phenomenal growth in terms of profitability. The operating revenue rose by more than 17 times from Rs 20 million (Mar-07) to Rs 349 million (Mar-08), mainly contributed by net gain on sale of investments and dividend income. Interestingly, the administration expenses didn't show any proportionate increase as these rose by only 216% as compared to humongous increase in revenue. Operating profit rose from Rs 12 million to Rs 349 million.

The operating expenses increased proportionately because the company increased its authorised share capital, so as the statutory fee also increased along with auditors' remuneration. The difference of fair value of a security and the carrying value, also known surplus on re-measurement of investments at fair value, has been Rs 156 million in the first three quarters under review. These revaluation gains added a major chunk to earnings after tax thus resulting in PAT of Rs 490.24 million.

The balance sheet size grew by 45% ie the net assets grew to Rs 1.058bn in Mar-08 as compared to Rs 41 million in June-07. Non-current assets grew by 261% mainly supported by 400% increase in property and equipment and a newly created account of long-term investment in subsidiary. Pervez Ahmed Securities Limited acquired 100% shares (8.5 million shares) of Pervez Ahmed Capital (Pvt) Limited, for total consideration of Rs 106m, which was formerly known as Mashriq Securities. The principal activity of the company includes shares brokerage, underwriting and investments.

Current assets grew by 148% this is chiefly due to 15 times growth in advances and refundable tax and short term investments (175% growth in 3 months ending Mar-08). Current liabilities augmented by 481% due to Rs 260m short term borrowings and Rs 1.11bn trade and other payables. Short term borrowings were from Arif Habib Bank Ltd and Dawood Islamic Bank Ltd Rs 160m and Rs 100m respectively. In the capital part of balance sheet, after a bonus issue of 10%, the paid up capital of the company amplified to Rs 659m on Mar-08.

FINANCIAL PERFORMANCE FY06-FY07 For FY06-07, ending in June, the country's economy progressed pretty well with a real GDP growth of 7%. In this fiscal year, strong expansion in real fixed investment of 20.6% was seen which was the highest in the preceding four years. Several sectors including manufacturing, transport and communication, finance and trade witnessed double-digit growth in private investment therefore contributing to overall GDP growth. In the same year, investments further supported by GDRs as well as mergers and acquisitions. All in all, the market had abundant liquidity from investments of US $5.1bn which facilitated the stock market growth.

The KSE-100 index surged to 13,772 points which is a 37.9% increase from 9,989 points. Aggregate market capitalisation also increased from Rs 2,801 billion to Rs 3,700 billion. During FY07 the profit after tax rose to Rs 135.92 million from Rs 5.2 million in FY06. The remarkable performance in FY07 is backed by gain on sale of investments, which contributed almost Rs 118 million to overall profits whereas in FY06 there was a loss on sale of investments which diminished the overall profitability.

This loss on sale of investments resulted in operating revenue of Rs (16.2m) in FY06. Despite of this huge operating loss in FY06, the company reported a profit after tax of Rs 5.2m due to positive flows of Rs 27.97m from 'surplus on re-measurements of investments at fair value'. It is important to keep in mind that the profits in FY06 were generated from an 8-month operation.

The operating revenue took quantum leap and it stood at Rs 125.38m in FY07. The operating revenue was matched by proportional increase in expenses like administrative expenses and financial charges. The Rs 135.92 million PAT translated into Rs 4.3 earnings per share on the basis of weighted average number of shares but there was no dividend given out in the year 2007 as the company was relatively new on LSE and KSE and it also needs to maintain liquidity.

is apparent from the pie charts that in pursuit of higher and stable gains, the company diversified into other sectors listed on the stock market. Aggressive portfolio change can be witnessed in FY07 over FY06. Major change is observed in textile investments from 74% (FY06) of total investments to 28% in FY07, this is a fall due to the negative outlook of the textile sector in the last fiscal year. In spite of strict regulations on banks, the banking sector has shown tremendous profitability and stability in earnings. Commercial banks constituted up to 27% of the total portfolio in FY07 as compared to 11% in FY06.

Profit and Gross profit margins were negative in FY06 due to a loss on sale of investments, which is apparent in negative operating revenue. Though the same ratios increased drastically and painted a more impressive picture of company's performance in FY07. ROA and ROE have shown a positive trend from 2% to 14% and 19% due to increase in profitability of the company. The ratios are not comparable on a head on basis with those in industry because the company is relatively new and has a smaller area of operations.

The D/E and D/A ratios slightly reduced in the following year. This change is attributable to shares issue of worth Rs 399.13 million issued for consideration other than cash against membership card and room. The average stock price hovered at Rs 27.20 throughout the year 2007, which doubled to Rs 57.20 in the first three months of 2008. The current ratio is also showed some slight improvements from 3.12 times to 3.9 times. This shows an improving liquidity picture of the company.

FUTURE OUTLOOK The continued bullish trend for last five years is beginning to lose its pace. The current bearish trend in stock market will result in loss of investors' confidence which is worsened by the unstable political scenario of the country. The macroeconomic indicators are also not favourable of the economy, the out comings of tight monetary policy and high inflation is apparent in the slow equity market growth. Moreover, net outflow from the SCRA accounts also dampen the investor spirit. Therefore, new diversified products that reach even more number of people are the need of the hour. The company is also looking forward to develop new business ventures to maximize its profits.