Johannesburg, 27 Nov 2013 — Global Credit Ratings has affirmed the national scale issuer rating assigned to FSDH Asset Management Limited of BBB(NG)(mq); with the rating placed on Rating Watch. The rating(s) are valid until 05/2014.
Global Credit Ratings has accorded the above credit rating(s) on FSDH Asset Management Limited based on the following key criteria:
FSDH Asset Management Limited (“FSDH AM” or “the company”) enjoys a strong brand acceptance in Nigeria, underpinned by FSDH Merchant Bank Limited’s (“FSDH”), formerly First Securities Discount House Limited, long corporate tenure and sound performance history as a discount house. Attesting to the above, FSDH AM’s Assets under Management (“AuM”) grew 3.6x from N11.1bn at FYE12 to N39.9bn at end-September 2013, following its appointment on a major mandate.
However, a change in FSDH AM’s ownership structure is likely going forward, following FSDH’s conversion to a merchant bank, although the Central Bank of Nigeria’s (“CBN”) final stance on FSDH’s plan to retain FSDH AM as a subsidiary has yet to be communicated. This uncertainty is reflected in the rating watch status, while the company’s final policy direction will be closely monitored by GCR. The accorded rating also recognises the available support from FSDH, and its absence would, accordingly, necessitate a downward review of the company’s rating.
FSDH AM is well capitalised with a total capital base of N762.5m as at end-F12, well above the statutory requirement. In terms of profitability, the company has maintained a good performance track record over the past 3 years, posting an after tax profit of N190.9m for F12 (representing a significant 108.2% growth over F11).
The rating also takes cognisance of FSDH AM’s susceptibility to event risk, specifically business concentration. Given its current scale of operations, FSDH AM’s business model is such that only core functions (investment management and administration, business development) are retained at the company level, with other business services outsourced internally. Whilst this operational structure provides cost saving benefits, it limits the level of direct control over staffing quality and management. Likewise, FSDH AM is governed by its parent’s risk management framework, with the responsibility for ensuring compliance with all regulations, internal procedures and controls vested with FSDH’s risk management unit.
Positive rating movement/s: The accorded rating would be sensitive to an established ability to navigate market cycles, increased market share, as well as a significant improvement in the portfolio concentration.
Negative rating movement/s: A negative rating action may arise from loss of market share/key clients, and an inability to manage volatility through market cycles.
NATIONAL SCALE RATINGS HISTORY
Initial/Last rating (Oct/2012)
Long term: BBB(NG)(mq);
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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; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
FSDH Asset Management Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to FSDH Asset Management Limited with no contestation of the rating.
The information received from FSDH Asset Management Limited and other reliable third parties to accord the credit rating included the latest 2012 audited annual financial statements, most recent year-to-date management accounts up to September 2013. In addition, other information specific to the rated entity and/or industry was also received.
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
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