Lagos Nigeria, 21 January 2020 – Global Credit Ratings has affirmed the manager quality rating of A-(NG)(mq) assigned to SFS Capital Nigeria Limited; with the outlook accorded as Stable. The rating is valid until September 2020.
Global Credit Ratings (“GCR”) has accorded the above credit ratings to SFS Capital Nigeria Limited (“SFS Capital”, “the company” or “the manager”) based on the following key criteria:
The management quality (“mq”) rating accorded to SFS Capital reflects GCR assessment of its corporate profile, financial sustainability, portfolio management skill and experience, and sufficiency of risk management, controls and systems.
SFS Capital has an operational track record of about eight years, and specialises in the provision of asset management and advisory services. SFS Capital’s operational structure is such that only core asset management functions and research are performed in-house, while trading mandates are executed through a third party (hence requiring few staff compliments). Overall, the profile of the management team is considered satisfactory.
The manager’s capital base has recorded consistent growth over the review period, registering at a peak of N764.7m at FY18 (FY17: N668.1m), representing a four-year compound annual growth rate of 13.1%. Growth was largely supported by internal capital generation. At this level, the Company’s capital is well above the regulatory minimum requirement of N150m for portfolio manager in Nigeria. Nonetheless, given the significant (32%) growth in assets at the balance sheet date, ratio of total capital/total assets moderated to 14.6% at FY18 (FY17: 16.9%). Profit after tax displayed a consistent upward trend over the review period, reporting a significant 33.9% increase to N120.5m in FY18. Accordingly, return on average equity and assets remained strong at 16.8% and 2.6% respectively in FY18 (FY17: 14.6% and 2%).
The risk management structure is considered satisfactory. The board of directors (“the board”) is responsible for the general risk management oversight through its relevant committee. The internal audit unit (which also reports directly to the board) is responsible for day-to-day monitoring and adherence to internal control systems.
An upward movement in the rating may result from a significant and sustained improvement in asset attraction and retention capacity. Conversely, a downward movement in the rating may arise from a decline in market share, key clients, the risk management assessment and significant decline in financial performance.
*Note that manager quality ratings are classified as non-credit ratings (refer to published rating scales and definitions).
NATIONAL SCALE RATINGS HISTORY
Initial/last rating (July 2018)
Long term rating: A-(NG)(mq)
Rating outlook: Stable
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for Rating Funds and Asset Managers, updated March 2017
Glossary of Terms/Ratios (February 2016)
RATING LIMITATIONS AND DISCLAIMERS
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; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
The ratings were solicited by, or on behalf of, SFS Capital Nigeria Limited, and therefore, GCR has been compensated for the provision of the ratings.
SFS Capital Nigeria Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The credit ratings above were disclosed to SFS Capital Nigeria Limited with no contestation of/changes to the ratings.
The information received from SFS Capital Nigeria Limited and other reliable third parties to accord the rating included the audited annual financial statements of SFS Capital Nigeria Limited for the year ended 31 December 2018. In addition, other information specific to the rated entity and/or industry was also received.