By SHABBIR H. KAZMI
Updated May 12, 2001

The Karachi Stock Exchange (KSE) has announced the broadening of the T+3 system by bringing six more companies in its net. Trades in Adamjee Insurance Company, Nishat Mills, Fauji Fertilizer, FFC-Jordan, WordCall and KESC would be settled under the T+3 system starting from May 21, 2001. Out of these six companies three scrips namely Adamjee, Fauji and FFC-Jordan are the picks of speculators. Therefore, daily trading volume of these scrips is expected to reduce considerably because under the new system trades would have to be settled every day requiring more liquidity in a shorter time frame.

Since the T+3 system is a step towards regulating the market, there is forecast that PTCL and HUBCO will also be brought under this net shortly. It is feared that bringing more and more companies under the T+3 system may cause massive selling by weak position holders. At the same time it is being suggested that Badla should also be abolished in Pakistan. The regulators are aware of the fact that bulk of the daily trading is routed through less than 10 members of the KSE and about a dozen entities control the entire Badla market.

PAKISTAN TELECOMMUNICATION COMPANY

The biggest challenge facing the present government, on the privatization front, is the sell-off of PTCL. It is a test case which is being watched carefully by the foreign investors. The ghosts of the past still haunt the foreign fund managers. After the first tranche was floated in 1994, the value of the scrip has plummeted. According to many fund managers PTCL has remained a perpetual under-performer. The scrip shot to Rs 84 in 1994 on the provisionally listed counter. It is currently traded around Rs 18 and the price does not reflect the correct valuation. The views expressed by the Privatization Minister that the GoP might consider transferring management control to a buyer for less than 26 per cent shares, may be a realistic view due to the overall sentiments for telecom companies in the region.

HUBCO

According to some documents exchanged between the GoP and the Asian Development Bank the payments to IPPs have adversely affected government's financing of public sector power entities. This has not only caused serious liquidity problems for WAPDA and KESC but also for the fuel supplying companies. One needs to assess the long-term prospects for the power sector in general and IPPs in particular. A reasonable approach is to reassess the power sector's financial structure in the light of the country's payment capability over the next five years. While Power Policy was being prepared WAPDA officials and analysts highlighted the risks of severe liquidity crunch to the utilities of the proposed policy but the then government steamrolled over these objections. Even the World Bank, involved in Pakistan since independence, did not take these apprehensions into account. We must accept that a mistake was made and now try to find a sustainable solution.

KOHINOOR ENERGY

According to a KASB report it is necessary for the investors to ask what does it mean for their current investment in IPPs in the near and intermediate term. Over the next twelve months HUBCO and Kohinoor Energy offer attractive upside potential. It is estimated that Kohinoor Energy is sitting on over one billion rupee cash and its only constrained by its lender's restriction on dividend payment. It is only a matter of time that once these restrictive clauses are satisfied the dividend payment may be announced by the Company. In earnings terms, assuming that last year's Rs 77 million provisions was a non-recurring item, Kohinoor's earnings are expected to rise by over 40 per cent for the year 2001.

UNITED SUGAR MILLS

The Company has posted Rs 60 million loss after tax for the year ending September 30, 2000 as against a nominal profit of Rs 1.6 million for the previous year. The main reason for this seems to be nearly 50 per cent reduction in sales which resulted in a gross loss amounting to Rs 48 million for the year under review as against a gross profit of Rs 23 million for the year 1999. The loss for the year 2000 has resulted in accumulated loss of Rs 73 million as at September 30, 2000.

SAPPHIRE FIBRES

While there was an increase in sales the availability of cotton at lower cost seems to have enabled the Company in announcing 145 per cent dividend for the year ending September 30, 2000. Despite such a substantial dividend the Company managed to raise its unappropriated profit to nearly half a billion rupee as at September 30, 2000. The Company is expected to continue to pay handsome dividend in the future due to a relatively smaller capital base. The dividend pay out for the previous year was 62 per cent. Sales for the year 2000 amounted to Rs 2.5 billion and gross margin was Rs 647 million.

MOVEMENT AT A GLANCE
SCRIP	HIGH (Rs.)	LOW (Rs.)	CLOSING  PRICE	TURNOVER  (SHARE MN)
PTCL	18.20	17.50	17.70	63,911,500
HUBCO	21.50	20.95	21.15	50,407,000
MCB	29.05	27.15	27.50	25,699,500
Fauji Fertilizer	43.15	41.50	41.90	13,427,900
FFC Jordan	5.35	4.50	4.70	11,304,000
Adamjee Ins.	64.85	58.25	59.20	10,390,000
KESC	5.40	4.75	4.80	1,401,000
Kohinoor Energy	8.50	8.20	8.45	47,500