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A weekly review of fundamentals enjoyed by the blue chips

By SHABBIR H. KAZMI
Updated Dec 11, 2000

The KSE-100 index registered a gain of 45 points during this week as the selling pressure reduced to some extent. However, the situation may reverse as weak holders may be forced to opt for selling in the following weeks due to severe liquidity crunch. Commercial banks who indulged in margin financing in the recent past, have to square their position before December 31, 2000 and are avoiding fresh lending.

Equities analysts believe that market may witness bullish sentiments with the beginning of year 2001 with some participation from foreign investors. The perceived country risk has improved with the disbursement of the first tranche by the IMF and paved way for restructuring of Pakistan's external debts.

SUI SOUTHERN GAS COMPANY

The Company has registered increase in net sales for the year ending June 30, 2000 as compared to the previous year but the benefit was completely eroded by the increase in cost of sales. While net sales increased from Rs 14 billion for the previous year to Rs 19.78 billion for the year 2000, cost of sales jumped from Rs 8.1 billion to Rs 13.5 billion during this period. Financial charges came down from Rs 2.6 billion for the year 1999 to Rs 1.7 billion for the year under review. The company decided to issue bonus shares amounting to Rs 875.445 million. To achieve this it has to transfer Rs 83 million from general reserve. The bonus issue works out to 15 per cent. During the year 2000 the Company helped in raising over Rs 2.76 billion as sales tax towards national exchequer. While the Company had contributed approximately Rs 2.3 billion towards gas development surcharge for the year 1999, the amount reduced to Rs 393 million only for the year under review.

FIRST LEASING CORPORATION

The leasing company has posted Rs 27.762 million loss before tax for the year ending June 30, 2000 as against a profit of Rs 5.863 million for the previous year. The main reason for the loss seems to be Rs 45 million provision for diminution in value of long-term quoted investment. Otherwise, profit before provision improved from Rs 6.3 million for the year 1999 to Rs 17.264 million for the year under review. While there was a decrease in income from finance lease operations a gain of Rs 20.746 million on marketable securities contributed towards higher income. There was a reduction in expenditure mainly due to lower financial and bank charges.

KOHINOOR ENERGY

The Company has not declared any dividend for the year ending June 30, 2000. It has also not paid any dividend for the previous year. While the sales increased during the year 2000 there was reduction in cost of sales. There was also reduction in financial charges. Profit after taxation came to Rs 393.6 million and the Board of Directors recommended issue of 30 per cent bonus shares. A point worth noting is that while operating profit was Rs 765 million, financial charges were Rs 409 million.

KOHINOOR GENERTEK

The Board of Directors have recommended 17.5 per cent dividend for the year ending June 30, 2000. It had paid 15 per cent dividend for the previous year. A point worth noting is that while profit after tax was Rs 68 million the Board preferred to pay only Rs 28.6 million to share holders. If one looks at last year's payout it was even more disappointing. Out of a profit of over Rs 128 million the Company paid about Rs 24.5 million to shareholders. Analysts feel that many sponsors chose to retain profit without any reason. Therefore, it becomes the responsibility of shareholders as well regulators to curb such practice. The sponsors must not be allowed to retain profit if there is no plan for expansion/BMR. It is a common observation that sponsors retain profit mainly for lending to associate companies.

INTER ASIA LEASING

Inter Asia Leasing has been in red for couple of years. Accumulated losses exceeded Rs 62 million as the Company posted Rs 12 million loss after tax for the year ending June 30, 2000. It had posted loss after tax amounting to Rs 56.5 million for the year 1999. For the year 1999 as well as for the year 2000 its expenditure has exceeded income. The situation was better for the year 2000 because it managed to write back Rs 17.6 million provision for potential lease losses.

HAROON OILS

The Company has posted Rs 13.645 million loss after tax for the year ending June 30, 2000. It had paid 15 per cent dividend for the previous year despite also posting a loss of Rs 525,914. This was made possible by transferring over one million rupee from general reserve. The main reason for posting loss for the year 2000 seems to be a colossal increase in cost of goods sold which reduced operating profit to Rs 2.5 million. A factor responsible for reduced profitability is financial and other charges amounting approximately Rs 14.5 million for the year 2000 as well as for the previous year. Yet another observation is higher operating expenses.

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE MN)

PTCL

19.70

18.85

19.40

219,768,000

HUBCO

17.15

14.55

17.08

198,851,000

SSGC

12.80

11.75

12.50

494,000

SNGPL

10.05

9.60

9.95

57,751,500

Koh. Energy

13.25

12.90

13.10

68,500

Koh. Generatic

8.50

8.15

8.15

23,000

Haroon Oil Mills

60.00

60.00

60.00

-

First Leasing

2.15

1.60

1.60

3,000

Source: Invest Capital & Securities