By SHABBIR H. KAZMI
Updated June 16, 2001

With no positive news in the making, some brokers tried to create buying spells in second tier scrips during this week. There was a deliberate effort to push KSE-100 index upwards. However, rallies lost the steam when large scale profitaking took place.

While there was a general perception that the federal budget for 2001-2002 has the potential to move the index, may analysts do not agree with this notion. Most of the expected announcements in budget have been made public.

The only expected announcement left is tax on capital gains. However, many analysts believe that the GoP has no other option but to continue this exemption and even broaden its scope to keep small investors interest live in equities market.

The increase in prices of gas and POL products seems to be a step towards increasing development surcharge on these products. However, this move can only push up rate of inflation and adversely affect corporate earnings.

PAKISTAN STATE OIL COMPANY

The GoP has announced increase in POL prices. Historically such price rise have given Pakistan State Oil significant inventory gains. However, since the oil price deregulation, oil marketing companies carry relatively lower stocks, the actual inventory gains this time are expected to be 30 to 35 per cent lower than what used to accrue historically. The Company has been able to regain its market share but continue to face tough competition in lubricants business. Further, with the shift in GoP's policy, to encourage use of gas/coal in power generation and switchover to gas by cement producers, PSO's sale of furnace oil is being threatened. According to a KASB report, even if PSO maintains its year 2000 payout of Rs 10 per share, its current yield of 7 per cent is relatively lower than comparable blue chip stocks such as PTCL (11.5%) and HUBCO (18%).

NAKSHBANDI INDUSTRIES

The Board of Directors have recommended to issue 100 per cent Right Shares at Rs 17.00 per share — including Rs 7.00 premium mainly to finance its expansion plan. According to Rahim Iqbal Rafiq & Company, Chartered Accountants, the break up value of Rs 10 ordinary share is Rs 28.92. The expansion project consists of three divisions: towel weaving, towel processing and fabrics dyeing. The project cost is estimated around Rs 690 million. Recently the Company has acquired assets to the extent of Rs 71.5 million for its expansion project. The remaining Rs 618.3 million execution is under process. The Company intends to add 120 looms for fabrics and 72 looms for terry towels in phases.

HUBCO

Shareholders of HUBCO desperately await approval of dividend payout by its lenders. On the positive note, analysts strongly believe that the lenders may not find any hitch in approving the payout. This belief is based on a very strong current cashflow due to exceptionally high capacity utilization. However, these analysts express strong apprehension about WAPDA's capability to pay the receivables. WAPDA's cashflow, at present, is not sufficient to pay current bills and the ability to make future payments is expected to further come under pressure. While WAPDA has approached NEPRA to allow 75 paisa increase in tariff, it has faced the highest resistance. Even the Planning Commission has opposed tariff hike.

WORLD CALL

Daily trading volume of the scrip was significantly higher at stock traded at a premium in comparison to historical discounts. After outperforming the market, over last one month, the stock faces potential threat of downslide. According to some analysts, WorldCALL is a potential winner in the backdrop of deregulation. At present, the Company is involved in establishing a fixed line payphone network and also attempting to position itself as a full telecom service provider. Through its investment in wireless and multimedia, pre-paid cards and an ISP, the Company will be able to offer a reasonable mix of services at competitive prices. The key risks facing the Company in its long-term ambitions are: the threat of being marginalized by PTCL after its privatization and operating in an environment in which competition is heating up.

UNION BANK

At present Union Bank has an equity base of Rs 1.10 billion. The equity of the Bank is being increased in a planned manner. Currently the bank is undergoing an investment phase with the intentions to: introduce state of-the-art technology, increase branch network, introduce innovative products and services, enhance corporate and brand image and build a strong team. To successfully implement this ambitious plan, efforts will be made to enhance equity by profit retention during 2001-2003 period. The bank also intends to issue Right Shares to its shareholders during the year 2001. The rights issue is expected to increase the equity of the Bank by Rs 400 million. In June 2000, the Bank acquired Bank of America's operations in Pakistan — adding new dimension to its business.

MOVEMENT AT A GLANCE
SCRIP	HIGH (Rs.)	LOW (Rs.)	CLOSING  PRICE	TURNOVER  (SHARE MN)
Hubco	19.65	19.00	19.50	69,008,000
World Call	21.70	17.05	17.25	53,516,000
PTCL	18.30	18.00	18.20	25,723,000
FFC Jordan	6.35	5.85	6.00	21,304,000
Fauji Fertilizer	37.95	35.85	37.45	15,028,900
Bank of Punjab	11.45	10.20	11.25	12,307,500
Ibrahim Fibre	14.55	14.25	14.35	112,000