. .



A weekly review of fundamentals enjoyed by the blue chips

By SHABBIR H. KAZMI
Updated Oct 02, 2000

The news of the week was the announcement by Karachi Stock Exchange (KSE) regarding transfer of three rooms in the name of Amanullah Adam to Arif Habib Securities, a corporate member. It will be interesting to recall that when news pertaining to default of Amanullah appeared in newspapers, the KSE sources insisted that he had settled all his liabilities and his assets were intact. The notice issued by the KSE now, contradicts the assurance given in the past. According to an analyst, the positive point is that the non-disclosure of the fact by the KSE saved the market from chaos. He said, "One must also keep in mind that Amanullah has interest in other businesses also. While he succeeded in settling his liabilities towards other stock brokers, in the past, he might have been forced by other lenders to sell his rooms to settle the liabilities. In the backdrop of show cause notices issued to over a dozen brokers, this transfer demands from the large retail investors as well institutional investors to be a little more cautious in selecting a broker.

In the absence of any news/rumour which can trigger buying in volume leaders, the second tire stocks have witnessed trading in large volume textile units being the conspicuous picks. The latest interest, apart from speculative motive, is based on bumper cotton crop and much awaited textile policy. However, there is a note of caution for investors that while picking up a company, they must do a thorough analysis of company's earnings forecast and should not depend on the past performance only.

THAL JUTE MILLS

The Company has announced 50 per cent dividend for the year ending June 30, 2000, despite reduction in profit before tax. During the year, there was increase in net sales to Rs 1.244 billion for the year as compared to sale of Rs 1.058 billion for the previous year. Cost of manufacturing went up from Rs 880 million for the year 1999 to Rs 1,074 million for the year under review. While administrative and selling expenses increased from Rs 44 million to Rs 49 million. Financial and other charges came down from Rs 26 million to Rs 15.4 million during this period. Despite reduction in profit after tax, the Company was able to pay as high a dividend as it had paid for the previous year. The sales for the year 2001 are expected to be higher due to bumper wheat crop but the profitability of the Company is expected to remain under pressure.

ISMAIL INDUSTRIES

The Board of Directors has decided to issue three Right Shares for every four shares (75%) at par value. The purpose of the issue is to meet the requirement for funds for expansion project/repay bridge finance arranged by the directors to improve debt equity ratio of the Company. Expansion has been considered necessary to meet the increasing demand of products manufactured and sold by the Company. The Company has already imported and installed the required machinery which was partly financed by borrowing from banks and partly through bridge financing by interest free loan from the directors. However, the projections made by the Company seems a little absurd keeping in view the amount invested and the increase in profit after tax. The forecast shows Rs 5 million for the year 2000, Rs million for the year 2001 and an increase of one million for the year 2002 and 2003 respeectively. The Right Issue is not expected to attract the attention of existing shareholders as the prospects for earnings growth are marginal.

KHADIM ALI SHAH BUKHARI & CO

The Company has released the financial results for the year ending June 30, 2000 and the Board of Directors has recommended 16 per cent dividend it had paid 35 per cent dividend, amounting to Rs 66.718 million, for the previous year. The Board has also recommended issue of 25 per cent Bonus Shares and 25 per cent Right Shares at a premium of Rs 5 per share. The purpose for the Right issue at premium is to improve the liquidity to benefit from business opportunities which will enhance profitability of the Company. The equities market has remained directionless for months. After concluding successful deal with the IMF, the enhanced interest of foreign investors in Pakistan's equities market is expected to increase volume of business handled by the KASB.

CRESCENT LEASING CORP

Profit after tax for the year ending on June 30, 2000 was more or less at the level of previous year. While cresLease had paid 10 per cent dividend for the previous year, it preferred not to pay any dividend for the year 2000. However, the Board of Directors has recommended to issue 16.67 per cent Bonus Shares out of premium on issuance of right shares account. While the income from lease operations and other income for the year came down, the reduction was more than compensated by the increase in income on investments. As regards expenses, the advantage of reduction in financial charges was eroded by the increase in administrative and operating expenses.

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

TURNOVER
 (SHARE MN)

CLOSING 
PRICE

PTCL

25.90 25.80

54,191,000

25.80

Hub Power Co.

19.10

18.35

433,896,000

19.10

Fauji Fertilizer

41.20

40.40

5,298,200

40.40

Engro Chemical

53.80

52.30

12,995,100

53.80

Thal Jute

16.50

14.00

56,500

16.50

Ismail Industries

11.55

11.55

-

11.55

Crescent Leasing

13.00

9.00

23,000

9.50

KASB

23.10 21.05

3,000

23.10

Source IP Securities