Announcements

GCR affirms CBZ Asset Management (Private) Limited’s rating of A(ZW)(mq); Outlook Stable.

Johannesburg, 28 November 2016 — Global Credit Ratings has affirmed the national scale manager quality* rating accorded to CBZ Asset Management (Private) Limited of A(ZW)(mq); with the outlook accorded as Stable. The rating is valid until November 2017.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above manager quality rating to CBZ Asset Management (Private) Limited, (trading as “Datvest”, “the company”), based on the following key criteria:

The manager quality (“MQ”) rating of Datvest reflects GCR’s assessment of its corporate profile, financial sustainability, skill and experience in portfolio management, and sufficiency of its risk management, controls and systems. Corporate profile: Datvest is a long-standing domestic brand with a 26 year track record and market share of Assets Under Management (“AUM”) of approximately 6% at 30 September 2016, making it the third largest asset manager in Zimbabwe out of a total of 16. The company is a wholly owned subsidiary of CBZ Holdings Limited (“the group”), the largest listed financial services group on the Zimbabwe Stock Exchange. Datvest draws on a stable and experienced senior management team.

Financial sustainability: GCR considers Datvest’s financial standing to be comfortable in light of its close association with the group (including access to technical, systems, credit, and research support), and its well capitalised position, holding core capital of USD2.6m at 1H F16, against a regulatory requirement of USD0.5m. Despite improved cost containment (with operating costs increasing by only 2.2%), in F15 net profit declined by 56.0% to below USD0.2m, due to a decline in AUM which resulted in a decrease in fee and commission income. Consequently, ROE declined to 5.9% (F14: 14.3%). Revenue remained under pressure in 1H F16 due to the aforementioned factors, but the company’s earnings generation is still considered adequate.

Portfolio management: The company implements a top-down investment approach that is monitored on a weekly basis by an executive committee. Fixed income investments (which constitute the largest portion of AUM) are largely placed with highly rated financial institutions, taking cognisance of liquidity requirements. Asset selection is primarily based on research driven fundamental valuations (focusing on value investments that are underpriced by the market, and top tier companies). This is supplemented by technical analysis, in particular, when optimising entry and exit opportunities in relation to equity. AUM declined by USD3.6m (2.7%) to USD128.8m year-on-year to 30 September 2016, largely due to a fall in foreign investment levels and negative returns across all blue chip companies. Nonetheless, the company has continued to meet its investment performance objectives since inception, outperforming its set benchmarks. Looking ahead, the weak macroeconomic conditions are expected to persist, increasing the pressure on companies’ financial performance and leading to further net foreign investor outflows.

Risk management: Risk management has become more prominent due to the volatility in the country’s capital markets. The company’s flat organisational structure has allowed management to be closely involved in all key transactions. Risk is managed holistically at senior management/board levels, with Datvest benefiting from the group’s operational risk control framework. It’s operational and IT environment provides efficient work flow, matching the funds’ needs. Investment decision making is highly disciplined, primarily driven by a risk model, with implementation by the portfolio management team under tight portfolio volatility control. Despite this, the company’s investment portfolios exhibit high counterparty concentration due to its selective investment criteria coupled with the challenging economic conditions (which have resulted in many company failures).

An improvement in the company’s market share, fund performance, portfolio diversification, and overall operating environment could lead to an upward movement in the rating. A negative rating action may arise from loss of market share/key clients, continued pressure on profitability, as well as a reduction in available support from the group (which supports the current rating).

*Note that MQ ratings are classified as ‘non-credit ratings’ (refer to GCR’s published rating scales and definitions).

NATIONAL SCALE RATINGS HISTORY    
     
Initial/last rating (December 2015)    
Management Quality rating: A(ZW)(mq)    
Rating outlook: Stable    

ANALYTICAL CONTACTS

Primary Analyst   Committee Chairperson
Kuzivakwashe Murigo   Omega Collocott
Credit Analyst   Sector Head: Financial Institution Ratings
(011) 784-1771   (011) 784-1771
murigo@globalratings.net   omegac@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Criteria for Rating Funds and Asset Managers, updated March 2016

Datvest rating report (2015)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.NET.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

CBZ Asset Management (Private) Limited participated in the rating process via face-to-face management meetings and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The rating has been disclosed to CBZ Asset Management (Private) Limited with no contestation of the rating.

Information received from CBZ Asset Management (Private) Limited and other reliable third parties to accord the rating included:

  • Audited financial results as at 31 December 2015 (and one year of comparative numbers)
  • Unaudited interim results at 30 June 2016
  • Asset allocation information from January 2012 to 30 September 2016
  • Latest internal and/or external audit report to management
  • A breakdown of facilities available and related counterparties
  • Corporate governance and enterprise risk framework

The rating above was solicited by, or on behalf of, CBZ Asset Management (Private) Limited, and therefore, GCR has been compensated for the provision of the rating.

GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S FINANCIAL INSTITUTIONS GLOSSARY

Asset A resource with economic value that a company owns or controls with the expectation that it will provide future benefit.
Audit Report A written opinion of an auditor (attesting to the financial statements’ fairness and compliance with generally accepted accounting principles).
Capital The sum of money that is invested to generate proceeds.
Corporate Governance Refers to the mechanisms, processes and relations by which corporations are controlled and directed, and is used to ensure the effectiveness, accountability and transparency of an entity to its stakeholders.
Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
Diversification Spreading risk by constructing a portfolio that contains different investments, whose returns are relatively uncorrelated. The term also refers to companies which move into markets or products that bear little relation to ones they already operate in.
Equity Equity (or shareholders’ funds) is the holding or stake that shareholders have in a company. Equity capital is raised by the issue of new shares or by retaining profit.
Financial Institution An entity that focuses on dealing with financial transactions, such as investments, loans and deposits.
Interest Scheduled payments made to a creditor in return for the use of borrowed money. The size of the payments will be determined by the interest rate, the amount borrowed or principal and the duration of the loan.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price. 
Long-Term Not current; ordinarily more than one year.
Long-Term Rating Reflects an issuer’s ability to meet its financial obligations over the following three to five year period, including interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.
National Scale Rating Provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country, which in most cases will be the sovereign state.
Net Profit Trading/operating profits after deducting the expenses detailed in the profit and loss account (including taxes).
Operational Risk The risk of loss resulting from inadequate or failed internal processes, people or systems or from external events. This includes legal risk, but excludes strategic risk and reputational risk.
Portfolio A collection of investments held by an individual investor or financial institution. They may include stocks, bonds, futures contracts, options, real estate investments or any item that the holder believes will retain its value.
Rating Outlook Indicates the potential direction of a rated entity’s rating over the medium term, typically one to two years. An outlook may be defined as: ‘Stable’ (nothing to suggest that the rating will change), ‘Positive’ (the rating symbol may be raised), ‘Negative’ (the rating symbol may be lowered) or ‘Evolving’ (the rating symbol may be raised or lowered).
Risk The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.
Risk Management Process of identifying and monitoring business risks in a manner that offers a risk/return relationship that is acceptable to an entity’s operating philosophy.
Security An asset deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default.
Short-Term Current; ordinarily less than one year.
Short-Term Rating An opinion of an issuer’s ability to meet all financial obligations over the upcoming 12 month period, including interest payments and debt redemptions.
Stock Exchange A market with a trading-floor or a screen-based system where members buy and sell securities.
   

For a detailed glossary of terms utilised in this announcement please click here

GCR affirms CBZ Asset Management (Private) Limited’s rating of A(ZW)(mq); Outlook Stable.

image_pdf

Leave a Reply



ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright © 2022 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.