20000219

Brief recordings

BY SCANNER

Modarabas

First Elite Capital Modaraba

Year Ended June 30, 1999

Overview

This Modaraba is one of the constituent members of a large conglomerate Crescent Group. The Modaraba was listed at the stock exchange in 1992. The 10 rupee certificate in the Modaraba is trading at Rs 1.60 at massive discount but this is slight improvement over 6-year's lowest price of Rs 0.70 recorded in 1998. The 6 year highest price of its certificate was recorded at Rs 14.75 in 1994. The paid-up capital of the Modaraba has remained stagnant at Rs 113.40 million for several years. But series of accumulated losses have severely impaired its equity base. So book value of the certificate in the previous year was merely Rs 7.82. However this year the Modaraba improved the book value marginally to Rs 7.95 because of turn-around in the operating results. The Modaraba made a net profit of Rs 1.39 million which is very close to break-even but did replace the net loss of Rs 3.85 million last year.

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The Modaraba is currently engaged in various modes of Islamic funding and related business such as, Morabaha and Musharaka finance, trading, investment in shares of listed companies and leasing.

It is a perpetual, multipurpose Modaraba formed under the Modaraba Companies and Modaraba (floatation and control) Ordinance 1980 and rules framed thereunder. It is managed by Crescent Modaraba Management Company Limited, a company incorporated in the province of Punjab. The management company is one of the constituent members of Crescent Group Companies.

During the period under review, in the financial year 1998-99, the outstanding Musharaka finance balance in the current assets account marginally declined by 6.9% to Rs 6.755 million from Rs 7.255 million posted in the previous year. This asset constituted 7.2% of the total assets of the Modaraba on the balance sheet date. But no revenue has been booked on account of this account for the year under review. Whereas last year the revenue on this account was booked for Rs 5.36 million.

The profit on Musharaka transaction is being shared by the Modaraba in an agreed ratio based on estimated profit for the transaction, loss if any, is shared equity with the customers. The outstanding amount of Rs 6.75 in this account represents amount of Rs 7.56 million less provision for doubtful receivable at Rs 0.81 million.

The receivables in Musharaka finance are secured against fixed assets and demand promissory note. The Modaraba has not provided further amount in this accounts as the matter is in the court and the "Modaraba having sufficient evidence in its favour stands a chance of winning the case on merit," as stated in the relevant note annexed to the accounts under review.

The balance in the Morabaha finance under current asset account amounted to Rs 22.12 million which amount shows increase by 16.05% from previous year's balance at Rs 19.06 million. This asset constituted 23.7% of total assets and income generated from this account amounted to Rs 3.32 million which the second largest item of income after income from leasing operations at Rs 4.76 million. While the Morabaha finance was 23.7% of total assets at the year end, the income for the whole year from this transaction was 33.8% of gross revenue.

The profit from Morabaha transaction is recognised on prorata accrual basis calculated on number of days funds were utilised.

The Morabaha transactions are on deferred payment basis at a specified profit margin. These are secured against marketable securities, personal guarantees, mortgage of fixed assets, hypothecation of stocks and demand promissory notes.

The notes annexed to the accounts clarified that out of the total outstanding amount of Rs 64.09 million the provisions for doubtful receivables amounted to Rs 41.97 million. The remaining amount of Rs 22.12 million was shown under current asset account for Morabaha finance.

Out of Rs 41.97 million the amount of Rs 19.13 million is secured and Rs 22.84 million is un-secured. The Modaraba has filed several recovery suits with Modaraba Tribunal.

There is also amount due from associated undertakings at Rs 10.22 million which is mostly from its management company.

The company has short term investment portfolio at Rs 27.81 million works out to 29.8% of total assets. But income from this asset was simply dividend income of Rs 0.54 million which amount is only 5.5% of gross revenue. The market value of this portfolio on 30th June 1999 was Rs 13.42 million which reflects 52% diminution in value. The external auditors have drawn the attention towards the diminution and stated that the management has not made provision because they consider that it is a temporary phenomenon.

In addition to this, the relevant note also states, "had the provision for diminution in the value of investments been made in the accounts, the loss for the year would have been higher by similar amount."

The notes annexed to the account also have the disclosure that substantial portion of the investment portfolio has not been registered in the name of Modaraba. In some cases, are only partially registered.

The Modaraba's gross income at Rs 9.81 million decreased by 14% the over previous year's Rs 11.41 million. The Modaraba made break-even with small profit of Rs 1.39 million which replaced previous year's loss of Rs 3.85 million. Hence the busted equity base slightly improved but the equity base remained weak.

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Performance Statistics (Million Rupees)

June 30 1999 1998

Capital & LiabilitiesÉÉÉ

Paid-up Capital (Fund): 113.40 113.40

Reserves: 0.50 0.50

Accumulated (Loss): (23.77) (25.17)

Equity: 90.13 88.73

L.T. Debts: Ñ Ñ

Customer Security Deposit: Ñ Ñ

Current Liabilities: 3.29 1.43

AssetsÉÉÉ

Fixed Assets ÑÊOwn Use: 3.06 2.28

Asset Ñ Least Out: 11.37 2.56

Current AssetsÉÉÉ

Investments: 27.81 25.45

Morabaha Finances: 22.12 19.06

C.M. Musharaka Finance: 6.75 7.25

Other Current Assets: 22.31 33.56

Total Current Assets: 78.99 85.32

Total Assets: 93.42 90.16

Sales, Profit & PayoutÉÉÉ

RevenueÉÉÉ

Income from Leasing Operations: 4.76 1.85

Profit from Musharaka Finance: Ñ 5.36

Profit from Morabaha Finance: 3.32 2.44

Dividend Income: 0.54 0.46

Trading Income: Ñ 0.35

Income from Investment: Ñ Ñ

Other Income: 1.19 0.95

Gross Revenue: 9.81 11.41

Expenditure: 8.23 15.63

Management Company Fee: 0.14 Ñ

Profit/(Loss) Before Taxation: 1.44 (4.22)

Net Profit/(Loss) After Taxation: 1.39 (3.85)

Financial RatiosÉÉÉ

Certificate Price (Rs) 16/2/2000: 1.60 Ñ

Book Value Per Certificate (Rs): 7.95 7.82

Price/Book Value Ratio: 0.20 Ñ

Debt/Equity Ratio: 0:100 0:100

Current Ratio: 25.81 59.66

Net Profit/Gross Revenue (%): 14.16 (33.76)

EPC (Rs): 0.12 (0.34)

Price/Earning Ratio: 8.33 Ñ

R.O.E. (%): 1.54 (Ñ)

R.O.A. (%): 1.48 (Ñ)

R.O.C.E. (%): 1.54 (Ñ)

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Company information: Modaraba Company: Crescent Modaraba Management Company Ltd. Chairperson: Shahana Javed Amin. Chief Executive Officer: Aamir Iftikhar Khan. Director: Mohammad Javed Amin. Corporate Secretary: Mohammad Arif Hilal. Principal & Registered Office: 19, Abu Baker Block, New Garden Town, Lahore. Phone: (042) 5862544/5836621.