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THE KASB REVIEW
STOCK MARKET AT A GLANCE

  1. FINEX WEEK
  2. STOCK WATCH
  3. STOCK MARKET AT A GLANCE

Updated on Apr 21, 2001

The KSE Overview: A Show of Strength

The KSE-100 Index closed last week at 1387, up a marginal 1% from the previous week's closing of 1370. The bullish start of the week seemed to follow global equity market behavior and normally one would have expected a 3-4% gain as happened in most stock markets last week across the globe. But hey, this is Pakistan, and we have got to be different! So we had our law and order problems and delay in court hearings regarding dismissal of cases against Hubco. The result? A see-saw market that went up 19 points in the first two days of the week, followed by 20 down points in the next two days and then back up 17 points on the last trading day of the week.

As a result of this "yo-yo" behavior the key pivotals ended last Friday at levels near to their closing rates the week before. What is important here, in our view, is that this behavior of the market is indicative of a strong consolidation at 1370-1400 levels. This should provide the market sufficiently strong footing to test its strong resistance of 1408 in the coming week.

After market announcement in the exchanges by Hubco stating that the Settlement Agreement concluded between Hubco, GoP and WAPDA on December 17, 2000 has been satisfied, this should provide the bulls with enough ammo to try and push the Index beyond 1408 levels. At the same time however, bears are still stalking around with rumors of another strike on Monday. It remains to be seen which group gains the upper hand. If the law and order situation remains stable, we may see the market break out of its 1408 resistance, in which case it is likely to consolidate around the 1420 -1430 range in the near term. This is an interesting chart area for the market. Over the last 18 months, the 1420 1430 levels have been important direction providing points for the Index. In December 1999, June 2000 and February 2001, the market got stuck at these levels for a time before breaking out decisively, upwards in December 1999 and June 2000, and downwards in February 2001.

We continue to forecast a range bound behavior for the Index for most of CY2Q01 with an expected range of 1350 1500. Further, recent market behavior indicates that there is strong support at low 1300 levels, implying a potentially higher upside in CY2Q01 than the downside. With the "badla" rates having slipped by almost 250 basis points last week, compared to the week before, most scrips are likely to be moving into a safe accumulation range except perhaps ICI which has been held high. Thus on the whole, barring any upset on the law and order front, we expect the market to build on its bullish momentum in the near term. Although on the upside, first the 1408 barrier needs to be broken decisively and then the 1420 1430 range negotiated before a longer term positive direction for the market is confirmed.

FMCG: Nestle MilkPak, a mature star

Nestle MilkPak Limited (NML) was incorporated in 1981, initially as MilkPak Limited. Later when the joint venture between Nestle S.A. Switzerland (the world's largest food company) and MilkPak Limited came through in 1988, the existing production facility of MilkPak in Sheikupura became a part of Nestle MilkPak Limited. The company is engaged in the manufacture and sales of dairy products, confectionery, culinary products, fruit juices, and purified water. Nestle is marketing Milkpak UHT milk, cream and butter, desi ghee, Everyday tea whitener, NIDO powder milk, Milo energy food drink, Nescafe Classic coffee, Frost cold drink, orange juice, infant cereals, Maggi noodles and yakhni, dessert mixes and custard as well as bottled water. In confectioneries range there are items like polo, Kit-Kat etc.

Nestle Milkpak's core raw material is milk and over the last twelve years the company has focused on improving the volume of milk for UHT processing. The company has established its own network of Village Milk Centers (VMC's) to collect milk from the local farmers in Punjab. At these centers, chillers have been installed to lower milk temperature to 4C for preventing bacteria development during long hauls to the factories, undertaken by a large fleet of specially insulated tankers. In general, Pakistan produces around 21.5 billion liters of milk annually, of which only 401.5 million liters is processed. Approximately half of this amount is processed into UHT milk, 40% into powdered milk and the remaining 10% into pasteurized milk, yogurt, cheese and butter.

NML's latest financial results reflect 14% top-line growth to PkR 6.6 billion for FY00, as the company has increased its market penetration by launching new products like Nescafe Frothe, Nestle Mango Juice, Nestle Yogurt and the popular cold coffee Nestle Frappe. Although an increase of 16% in sales volumes was witnessed in the domestic market, overall exports to Afghanistan, Bangladesh

and Central Asian Republics declined by 4%. This growth in sales volume may be largely attributed to the stability in the pricing policy of all NML's product ranges.

The COGS increased by 17% to PkR 4.8 billion for FY00, from PkR 4 billion for FY99, resulting in a decrease in the Gross Margins to 27% for FY00 from 29% for FY99. The increase in domestic POL prices, and electricity tariffs, brought about a jump of 31% in the Fuel and Power expenses. However, despite, the 2% decline in the Gross Margin there was an increase in the Gross Profit by 7%, driven by the top-line growth.

There was a marginal increase of 2% in the Operating Profits at PkR 650 million for FY00 from PkR 637 million for FY99. The most astounding expenses that brought about an increase in the Administration and Selling Expenses were 24% increase in the Salaries expense, 53% increase in the Travelling and conveyance expense and lastly, 40% increase in the Utilities expense. The first two figures were not a consequence of any external factors and therefore, could have been controlled more cautiously by the internal management of NML to achieve higher operating margins.

Profit on sale of fixed assets and sale of scrap, which constitutes Other Income for NML, showed an increase of 250% at PkR 14 million for FY00 from PkR 4 million for FY99, leading to a 4% increase in EBIT. Financial charges and taxes increased by 11% and 9% respectively, bringing down the NPAT by 3% to PkR 272 million for FY00 from PkR 280 million for FY99.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

5.65

5.67

0.35

Total Turnover (mn shares)

497.55

687.19

38.11

Value Traded (US$ mn.)

289.04

278.17

-3.76

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. shares)

99.51

137.44

38.11

Avg. Dly T/O (US$ mn)

57.81

55.63

-3.76

KSE 100 Index

1371.71

1387.73

1.17

KSE All Share Index

867.01

877.11

1.165

.Source: KSE, MSCI, KASB



ASIA PACIFIC & AUSTRALIA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Bombay

BSE

3583.04

+8.96

0.25%

Hong Kong

Hang Seng

13448.13

-100.82

-0.74%

Singapore

Straits Times

1656.19

+10.25

0.62%

Sydney

S&P ASX 200

3303.5

-20.70

-0.62%

Tokyo

Nikkei

13765.67

-102.61

-0.74%

.



EUROPE & UNITED STATE OF AMERICA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Frankfurt

DAX

6117.18

-64.73

-1.05%

London

FTSE

5879.8

+8.20

0.14%

Paris

CAC

5449.34

-30.71

-0.56%

Dow Jones

Industrial

10579.85

-113.86

 

NASDAQ

Composite

2163.41

-18.73