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By SHABBIR H. KAZMI
Updated Jun 26, 2000

At the face value the impact of 2000-2001 budget seems to be of marginal consequence for the corporate sector. However, it is a strong indicator of the commitment of the GoP to put the economy back on track. The government has taken a positive step towards deregulation of the oil and gas sector by deregulating furnace oil imports and LPG prices. Another positive development has been the continuing effort to reduce interest rates. In the short to medium term, the market may not respond to these positives due to concerns over the GoP's efforts for documentation. Market sentiment is likely to be adversely affected by the decision to impose the 5 per cent surcharge on corporate earnings. Another issue that may continue to affect equities market is the new turn in WAPDA-HUBCO tussle. Pharmaceuticals sector which has remained under pressure for some time, dominated by multinational companies, seems to benefit with the promise for upward price adjustment.

HABIB BANK

Announcement of 100 per cent Right Issue amounting to approximately Rs 12 billion and its subsequent sale to general public is worth keeping the track. This is part of the GoP's plan to enlist all the NCBs on stock exchanges and privatization through stock exchanges. The real issue is, does the market has such an appetite? Though the plan is to sell the Bank's share at a par value of Rs 12, a lot of interest will be dependent on GoP's efforts to ensure higher profitability of the NCBs. An effort has been made, not to change tax on accrued interest income. While this may affect the overall tax collection the objective of the move seems to be ensuring higher liquidity of banks to finance expected enhanced funds requirement for BMR.

MUSLIM COMMERCIAL BANK

The GoP has also announced that enhancement in corporate tax will not apply to banks, Corporate and Industrial Restructuring Corporation will acquire the non-performing assets of the banks and accrued interest on NPLs credited to suspense account will not be taxed. The scrip was selling at discount to its fair value but announcement of its results is expected to push its price. While some other banks are suffering from declining quality of their asset portfolio the Bank seems to be the focus particularly because of GoP's plans to off-load its stake in the Bank.

UNION BANK

The bad days of the bank seems to be over partly due to change of ownership and more importantly keeping in view its expected takeover of Bank of America's Pakistan operations. While the deal has not been finalized as yet, if concluded, would more than double the deposits of the Bank. However, the investors in equities market may not benefit as the liquid float is a very small percentage of the total paid-up capital.

HUBCO

Amid intensified tussle between the Company and WAPDA, deregulation of furnace oil import may generate some buying interest. However, many analysts do not recommend buy or accumulate option due to the resolution not being in sight in the near future. While some analysts suspect that National Power of UK may not be interested in maintaining its exposure in Pakistan, other vehemently rule out any such move. There is a need for immediate resolution because shareholders have not received any dividend for a long time.

PAKISTAN STATE OIL COMPANY

The impact of upward revision in diesel oil price will be more than offset by increase in tax liability of oil marketing companies for the next year. However, inventory gains and normal increase in rupee-margin will boost the Company's profit after tax. Currently the Company enjoys approximately 66 per cent share in diesel market. Deregulation of furnace oil market will theoretically affect the Company — enjoying 83 per cent of the market share. Practically all kind of handling and storage facilities will be provided by the Company because it has the largest storage and handling infrastructure.

ICI PAKISTAN

The scrip seems to be in active demand at present after the fiasco in equities market. One really fails to understand the reason for sudden bullishness. As such prices of PSF are not attractive enough to boost the profitability of the Company. However, the recent investment in soda ash and better capacity utilization of PTA plant may help in containing the overall loss.

SUI TWINS

Deregulation of LPG price improves the privatization prospects of LPG operation of Sui Southern Gas and Sui Northern Pipeline. The sale of these units will be recorded a one time gain in other income of these companies. At least 10 per cent increase in gas tariff is expected during the next financial year in order to collect the targeted surcharge. It is also expected that the price of raw gas will also enhance by 13 per cent due to its linkage with crude oil price — not expected to come down in near future.

 

SCRIP

HIGH

LOW

TURNOVER (SHARE MN)

CLOSING PRICE

Muslim Commercial Bank

31.00

29.35

2,977,000

30.15

Hub Power Company

15.60

14.25

23,284,000

15.60

Pakistan State Oil

175.75

162.40

155,117,600

162.40

Askari Comm. Bank

14.25

13.95

340,500

13.95

ICI Pakistan

15.50

13.50

175,182,500

15.50