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THE KASB REVIEW

  1. The KASB review

Updated on Dec 06, 1999

The KSE 100 continues to steam upwards. After climbing over 1.3% over the last week, the KSE managed to continue its bull run by another 40 points. This 33% increase over the corresponding week saw the market crossing the 1260 mark in the process to close at 1260.89.

Key issues leading the increased activity in the KSE 100 was the resignation of the former governor of the State Bank of Pakistan from the National Security Council, which was a development largely expected. Also keeping the market buoyant was the positive news regarding an expected final solution about Hubco. Though nothing official has been concluded but sentiments are high regarding a final patch up deal.

Investors are anxiously awaiting the announcement by the Chief Executive concerning the economic package in the 15th. This is likely to have minimal reaction initially as the real test will be when the implementation stage arrives.

For the coming week we believe that initial resistance is likely to felt near the 1300 levels while support levels will tend to appear around the 1250 levels. With the market still in a bullish mood at the end of the week, any further upside should be utilized to reduce exposure in different scrips accordingly.

Sector Review: STOCK STRATEGIES FOR THE NEW YEAR

Where do we go from here? This must be the key question in most investors' minds. Year to date (YTD) the KSE-100 index is up almost 33% and approaching its 1300 psychological barrier. It has therefore become important to evaluate YTD stock performance and highlight key recommendations.

Hub Power: Speculation regarding an early resolution has edged the scrip closer to its fair value. Though we cannot assign a timeframe, a resolution is inevitable if the investment climate is to be improved as the new set of economic managers target. We continue with our Buy recommendation.

PTCL: A disappointing stock performance despite FY 99 results beating market expectations. The prevailing liquidity overhang is perhaps the main culprit though management also appears to slacking on line growth. Valuations still compelling Buy.

PSO & Shell: A direct beneficiary of reforms in the sector and improved economic activity resulting in a reduction in corporate risk has been strongly reflected through PSO's relative performance. The risk characteristic of Shell remained unchanged. We continue with our Buy recommendation on PSO and a Hold on Shell.

Engro & Fauji: Price performance of Engro is unjustifiable despite being the pick of the sector. Fauji better depicts the increasing competitive environment within the sector. We continue with a Sell on Engro and Hold on Fauji.

Lever Brothers: Threat from cheaper imports continues to dampen sentiments. We believe GST at retail has become an eventuality and should result in strong top line growth for the company. Buy.

Packages & Tri Pack Films: Brothers in arms, both stocks have done exceedingly well. Despite concerns surrounding the ability of Packages to repeat its stellar performance, its defensive nature should continue to appeal to investor sentiments, Buy. Tri Pack is planning on an expansion, which may reduce its payout in the coming year. Also, the stock is close to our fair value target, Hold.

Dewan, Dhan and Ibrahim: The trio have done well based on a sector turnaround. Demand for PSF has been strong on grounds of high cotton rates last year, which is not the case this year. Dewan and Dhan are overvalued, whereas Ibrahim possesses upside. We recommend a Shift out of Dewan and Dhan into Ibrahim.

Pak Suzuki: Increasingly competitive environment expected with the arrival of several new entrants. Volume sales are therefore likely to take a hit. Sell.

Adamjee Insurance: An improving stock market and law and order position has improved the outlook on the stock. We continue with a Buy recommendation.

ICI: High financial charges and a low capacity utilization on PTA should keep the bottom line in red. Sell.

Comparison of Returns

Rel. Performance

Price3

Month

6 Month

YTD

Hub Power

20.55

3%

101%

18%

PTCL

20.70

-8%

96%

-19%

PSO

143.15

5%

141%

64%

Engro

113.50

39%

146%

11%

Fauji Fertilizer

47.80

-15%

95%

-22%

Lever Brothers

850.00

-12%

103%

-6%

Packages

56.20

-5%

131 %

29%

Tri-Pak Film

29.75

11%

131%

53%

Dewan Salman

29.30

-19%

100%

29%

Dhan

4.95

-13%

114%

38%

Ibrahim

9.00

4%

115%

32%

Pak Suzuki

20.25

-23%

72%

-41%

ICI Pak. Ltd.

9.35

-10%

97%

-40%

Adamjee Ins

43.25

6%

88%

5%

Shell

261.70

18%

155%

-10%

Source: KASB Research