. .



A weekly review of fundamentals enjoyed by the blue chips

By SHABBIR H. KAZMI
Updated Sep 25, 2000

The market remained devoid of any news which could trigger even speculative buying. Investors preferred to sit on the sideline and follow wait and see policy. An important announcement is that after September 29, 2000 transaction in HUBCO shares could not be executed at Lahore and Islamabad stock exchanges. This may cause some selling pressure in the scrip and may result in decline in quoted price as well as decline in KSE-100 index.

For a long time trading in HUBCO has been driven by rumours and views. Its fundamentals have gone weaker due to the delay in resolving the controversy with WAPDA. The resolution may get difficult due to persistent increase in crude oil price ultimately affecting WAPDA and its consumers. Some analysts say that in Pakistan the largest turnover in HUBCO, apart from its large free float, has been due to the ongoing controversy. They also go to the extent of asking that if the issue is resolved how would the market behave? However, it is certain that there will be surges of lesser magnitude in KSE-100 and the daily trading may go down further.

Ironically the two oil marketing companies, Shell and PSO, have been revising furnace oil price too frequently. Such a policy is creating a lot of confusion for the analysts in preparing any forecast for the two companies enjoying keen interest of investors and speculators.

Badla rate is also at a very low at present. This clearly indicates that investors are not willing to take positions. While it is commonly said that the lower interest in equities market is due to prolonged negotiation with the IMF, it carries hardly any weight. It is more or less clear that Pakistan would get the assistance and quantum will also be substantial.

Announcement of textile policy has been delayed. While APTMA seems to be exerting all its pressure for more negotiating concessions, it tend to forget the forecast of 16 million bales for the new crop. The higher output will certainly plunge the price and compensate for the increase in utility charges.

INDUS MOTOR COMPANY

The Company has released the financial results for the year ending June 30, 2000. It has also declared 15 per cent dividend. Whereas, it had declared 20 per cent dividend for the year 1999. While there was increase in net sales there was also an increase in cost of sales which resulted in reduction in gross profit. There was reduction in financial and other charges. Profit before tax for the year 2000 was Rs 280 million as compared to a profit of Rs 501 million for the previous year.

PAKISTAN INDUSTRIAL LEASING

Revenue of the Company for the year ending June 30, 2000 came down to Rs 592 million as compared to a total of Rs 653 million for the previous year. There was decline in income from lease financing and short-term placement. However, other income jumped from Rs 1.6 million for the year 1999 to Rs 6.6 for the year under review. There was also reduction in total expenditure and provisions which provided some respect to profit before tax which was nearly Rs 28 million.

FFC-JORDAN

Apparently after the Company posted Rs 2.3 billion loss for the first half of the year 2000, efforts were said to be made to ask the GoP to impose regulatory duty on the import of DAP type fertilizer. It is true that global prices of DAP have come down but this was not the only factor responsible for the huge losses. Another legacy that fertilizer plants make huge profit due to availability of gas at subsidized rate does not seem to be working in case of FFC-Jordan. While the imposition of regulatory duty may help the Company in minimizing its losses, it would be against the interest of farmers. As such farmers in Pakistan do not use balanced doze of fertilizer and with the increase in DAP price the balance would be further disturbed.

FAUJI FERTILIZER

With the introduction and stringent enforcement of new exposure limits and reduction in average daily trading volume at the three stock exchanges, there has been a marked decrease in daily turnover of Fauji shares. Another factor which seems to be working against the Company is its huge investment in FFC-Jordan and the need of FFC-Jordan for the induction of fresh capital. If FFC-Jordan increases its paid-up capital through Right Shares it will have a negative impact on always cash rich Fauji.

INTERNATIONAL INDUSTRIES

The Company has posted an overall improvement for the year ending June 30, 2000 as compared to the previous year. The Company announced final dividend of 22.5 per cent. It has already paid interim dividend. A 10 per cent bonus share was also announced. All this was possible due to nearly double the profit posted for the year 2000 as compared to the previous year. Profit after tax for the year 2000 was Rs 82.8 million as compared to a profit of Rs 44.8 million for the previous year. This was despite the increase in operating expenses and financial charges.

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

TURNOVER
 (SHARE MN)

CLOSING 
PRICE

PTCL

26.15

25.60

89.86

25.80

Hub Power Co.

18.85

17.95

206.89

18.30

ICI Pakistan

13.35

13.05

36.15

13.05

Fauji Fertilizer

40.65

39.90

5.85

40.45

FFC Jordan

7.35

7.15

4.79

7.30

Source IP Securities