By SHABBIR H. KAZMI
Updated June 09, 2001

The market remained range bound during the week and profit taking was common. The expected rallies before budget seems to be no longer there. However, analysts fail to find a plausible reason for the behavior of the market. They term it directionless as well as devoid to any improvement in investors' confidence. However, liquidity crunch is expected to ease out with rupee gaining strength against dollar.

Institutional investors are mostly staying at sidelines due to liquidity crunch, end of financial year, rather than lack of strong economic fundamentals. Analysts expected decline in Fauji Fertilizer share price due to its expected Rs 3 billion investment in FFC-Jordan. While urea off-take has remained low due to drought like situation, FFC-Jordan continue to suffer due to its own problems.

NATIONAL FIBRES

Habib Bank had decided not to transfer this recovery case to CIRC. Official Assignee of Karachi High Court has published an advertisement for sale of assets of National Fibres. It has solicited separate sealed bids for: 1) plot with building and machinery at a reserved value of Rs 600 million and 2) office furniture, fixture, electrical goods and vehicles etc. The court appointed management and Army Monitoring Cell are expected to make the best efforts to conclude the deal in such a way that the new owner may not face any legal implications. It will be interesting to watch the proceeding. Will the existing PSF manufacturers like Dewan, Ibrahim, Pakistan Synthetic and ICI Pakistan show any interest or bids will only come from PSF traders. Yet another important area which needs immediate attention is the fate of nearly 1000 employees who face a lay-off since April 2000. Will they be paid their dues? While efforts are being made to protect utility companies, full payment of dues to employees should also be made before the proceed goes to the creditors.

ADAMJEE INSURANCE COMPANY

According to a KASB report dividend payout by the Company has been on a decline since 1998. This trend is concurrent to the decline in its underwriting profits that have been under pressure for quite some time. Underwriting profitability has been affected directly by the poor performance in the car insurance business. It is also estimated that there has been a massive increase in its international claims. If one looks at premiums and claims it appears that over the last five years premiums have grown at a compounded annual growth rate of 12 per cent, whereas claims paid have grown by 15 per cent. Over 1996-1999 period, investment related profit has grown by 17 per cent. This has, to a significant extent, mitigated the volatility in underwriting income. Bulk of the capital gains mostly likely were made during first half of the year 2000. However, such gains will not be there for this year as the market has remained range bound. The Company had begun restructuring its investment portfolio in 1999 with greater focus on fixed income securities. Unfortunately, the timing of this move has not been appropriate. The changes in taxation ordinance has hit the insurance sector's profitability. Therefore, the full-year taxation is expected to be sharply higher causing a fall in net profit after tax.

FAUJI FERTILIZER COMPANY

The Company has issued a notice of extra ordinary general meeting for the approval of Rs 3 billion investment in FFC-Jordan. FFC-Jordan has also issued a notice for an extra ordinary meeting to further raise the capital by Rs 5 billion. Out of this Rs 3 billion will be contributed by Fauji Fertilizer, and one billion each by Fauji Foundation and Jordan Phosphates Mines Company. While Fauji Fertilizer will buy the additional shares at Rs 10.00, over the last six months FFC-Jordan share has been traded around/less than Rs 5.00. The break-up value of FFC-Jordan share, on the basis of last published financial statement come to Rs 7.00. Therefore, while Fauji Fertilizer will be investing Rs 3 million, the investment will by only worth Rs 1.8 billion on the basis of current price. According to some analysts, accumulated losses of FFC-Jordan may not allow the Company to pay any dividend for many more years to come. Therefore, it is feared that Fauji Fertilizer will not only face some liquidity crunch but there will not be any return, for years, on its investment in FFC-Jordan.

HIGHNOON LABORATORIES

The Board of Directors of the Company have recommended 20 per cent dividend for the year ending December 31, 2000. While there was increase in sales, gross margin and operating profit for the year improved. However, the increase in administrative, general, selling and promotional expenses and financial and other charges eroded the benefit of improvement in gross margin to a large extent. The persistent rupee depreciation and cost pushed inflation has kept profitability of pharmaceutical companies under pressure over the years.

MOVEMENT AT A GLANCE
SCRIP	HIGH (Rs.)	LOW (Rs.)	CLOSING  PRICE	TURNOVER  (SHARE MN)
Hubco	20.70	19.30	19.45	92,895,000
PTCL	18.80	17.85	18.10	87,213,500
FFC Jordan	6.55	5.20	5.85	69,925,500
Fauji Fertilizer	44.95	36.80	36.80	27,437,500
Engro	59.80	56.85	56.90	21,171,900
MCB	27.50	25.40	25.70	9,752,500
Nishat Mills	19.35	17.65	17.75	7,449,000
Adamjee Insurance	65.00	58.55	58.55	164,000