ISLAMABAD: Stock market is a risky business that needs a long-term investment strategy to escape risks and volatility. An effective investor is one who holds investment for at least five years for lower volatility and long-term dividends as in the stocks business, there is no ‘get rich quick’ scheme, said Tariq Mehmood, Manager of Munir Khanani Securities, in an interview with WealthPK. The details of the interview, covering different aspects of the stock business and market volatility, are as follows.
Q: Do exchange rate fluctuations affect the market? How does it affect your company and what steps do you take to overcome its effects?
A: Stock market is a risky business. Therefore, whenever the exchange rate changes negatively, there is always a potential for loss. Information, news, and rumors all have an impact on the market.
You need to come up with a long-term strategy if you want to prevent market losses. Long-term returns on stocks are more beneficial. The return on a long-term investment is higher than on a short-term one.
An effective investor is one who is ready to hold investment for at least five years. If you have any savings, you can use them to buy more shares at low prices when the market goes down and then set a target of three to four years. This is how you can use a long-term approach to reap long-term rewards. In such uncertain conditions when there are fluctuations, a long-term strategy is used by our company. Since the state of the market is so much worse nowadays, this tactic can be helpful.
Q: How does your company guide investors to invest on their own? Do you have a research team that critically analyses different factors?
A: We have our research team for market analysis. Apart from this, we have WhatsApp groups for traders’ guidance. We also give critical analysis via emails. We go through the financials of different companies. This can be annual data or quarter data. The company’s consistency in the profit on a yearly basis is considered attractive for investment. Our analytical team is housed at the headquarters. The increase and decrease in profit and EPS is very important and our team critically analyses this factor.
Q: What kind of financial risks is your company exposed to, which create significant business challenges? How do you plan to overcome such challenges?
A: The company’s activities expose it to a variety of financial risks: credit risk, liquidity risk, and market risk. Market risk includes interest risk and price risk. The risk management program of our company considers the unpredictability of financial markets and our main focus is to reduce the adverse effects. The Board of Directors has the overall responsibility for establishment and oversight of the company’s risk management framework. All treasury-related transactions are carried out within the parameters of these policies.
Q: What is credit risk? How does the company avoid it?
A: The total value of a company’s financial assets represents its maximum credit exposure. If we talk about the financial assets of the company, it had an investment of Rs2.2 billion in 2021 and just Rs1 billion in the previous year. Trade debts were Rs3.2 billion in 2021 and receivables Rs1 billion. The long-term deposits were Rs2.4 million in 2021. All of these are financial assets and they represent credit exposure.
Credit risk represents the financial loss that would be recognized at the reporting date if counterparties completely fail to perform the obligation that they have entered into with the company. The company’s policy is to enter into a financial instrument contract by following internal guidelines such as approving counterparties and approving credits.
Q: What is the minimum amount that can be invested in your company? What is the net capital balance as per the requirement of the securities brokers (licensing and operations) regulations, 2016?
A: The minimum requirement for investment through our company is PKR100,000. The company has a net capital balance as per the requirement of the securities brokers’ regulations of 2016. The cash in hand is around Rs1.11 billion.
Financial Performance:
The quarterly operating revenue for Munir Khanani Securities Limited for 3MFY22 is Rs279 million. There is a capital loss of Rs82 million in 3MFY22. The loss after taxation is Rs692 million.
The earnings per share (EPS) stood at minus Rs7.51 in 3MFY22, reports WealthPK.
Annual Performance
During the Fiscal Year 2020-21, the company generated operating revenue of Rs519 million over Rs161 million in 2019-20, registering an increase of 222%.
The capital gain for FY21 was Rs1.28 billion, registering an increase of 939% from Rs124 million in FY20.
In FY21, there was loss of Rs187 million in administrative and operating expenses, as compared to loss of Rs74 million in FY20.
The profit-before-tax for FY21 was Rs1.80 billion compared to Rs370 million in FY20, showing an increase of 387%.
Similarly, the profit after tax for FY21 was Rs1.59 billion compared to Rs363 million in FY21, showing an increase of 340%.
The EPS was Rs40.41 in FY2021 compared to Rs9.19 in FY2020, showing an increase of 340%.
Earnings Per Share
The EPS was Rs1.12 in 2016 and Rs13.7 in 2017. In 2018, the EPS dropped to minus Rs8.07 and further to minus Rs14.32 in 2019. It recovered in 2020 and reached Rs9.19 in 2020 and Rs40.41 in 2021.
Mohammad Munir Ahmed Khanani Securities (Pvt) Limited is a public limited company incorporated under the repealed Companies Ordinance, 1984. The company is a Trading Right Entitlement Certificate Holder of the Pakistan Stock Exchange Limited. The registered office of the company is located at Room No. 624-627, Stock Exchange Building, Pakistan Stock Exchange Road, Karachi. The principal activity of the company is to carry on the business of stock, brokerage, underwriting, and investment, etc.
