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A weekly review of fundamentals enjoyed by the blue chips

By SHABBIR H. KAZMI
Updated Jan 15, 2001

The market is getting into the grip of fear of T+3 settlement system. Daily trading volume has gone down and weak holders are taking an exit. The other reasons for lower volume are said to be HUBCO resolution and inability of market manipulators to create buying euphoria in some other scrips. The news regarding huge investment, touching almost US$ 400 million in textile sector should have attracted the investors. However, most of the textile companies have small paid up capital, shares are tightly held by the sponsors and market float is to small too play with.

Oil marketing companies, though only two, were not able to get any attention due to a highly uncertain forecast regarding crude oil price movement. The local POL prices are becoming unbearable and forcing the motorists to either cut down their petrol consumption or to switchover to other cheaper alternatives, i.e. diesel and CNG.

Therefore, the market, for the time being, is going through wait and see situation. Many analysts recommend accumulating cash for fresh buying at lower prices. The market is expected to witness further selling pressure in the following weeks fear of T+3 system.

PAKISTAN STATE OIL COMPANY

While weak demand for POL products hampers near-term growth, prospects of continued liberalization of the sector has attracted new players. Entry of Mobil, BP, Attock and Pak Arab refineries demand from the existing players to revamp their infrastructure and redefine their marketing strategy. However, the high cost of putting up an elaborate infrastructure is an effective entry barrier. Deregulation of furnace oil business in late 2000 has ushered in competitive era for oil marketing companies. Although, there is a new management team at the top level, analysts fear that the Company is yet not ready to effectively meet the challenge and may loose its market share. These analysts believe that the Company is gradually loosing its share in the high margin lubricants business as well as in diesel and motor gasoline.

IBRAHIM FIBRES

Keeping in view the numbers about the key players, Ibrahim Fibres has emerged the best performing company in the PSF sector. Looking at the PSF sector as a whole, a robust growth in sales is evident. Not only that there has been increase in sales revenue, gross profit and gross margins have improved significantly. This is due to increase in sales volume and better prices of the finished product. The higher offtake of PSF by local spinners has persistently improved capacity utilization of almost all the units. Despite its expected superior fundamentals, Ibrahim Fibres continues to trade at an attractive valuation to the sector. Since September 2000 the stock is up over 40 per cent and prospects for further increase are there.

GHANDHARA NISSAN

The year ending June 30, 2000 witnessed a drop of sales to Rs 66.5 million as compared to a level of Rs 291 million in the previous year. It looks disappointing and management has attributed this to severe threats from creditors, bankers and participants due to the financial crisis. The plant capacity remained under utilized due to lack of working capital. The recent financial restructuring and a contract assembly of Daewoo vehicles are expected to improve the fundamentals for the Company. Accumulated loss as at June 30, 2000 exceeds Rs 470 million.

TRI-STAR POWER

The Company may be termed a perfect case of waste of financial resources. It has a paid-up capital of Rs 150 million, general reserves of nearly Rs 68 million and operating assets of Rs 109.4 million. Its sales for the year ending June 30, 2000 was Rs 8.2 million only. As a result of cost of sales exceeding Rs 15 million the Company posted gross loss of Rs 6.85 million for the year. A closer probe indicates that the Company has made long-term investment of over Rs 78 million. This includes an investment of Rs 34.6 million in NIT units and Rs 36.7 million in an associated undertaking Tri-Star Energy Limited. However, the Company has not indicated any receipt of dividend income from NIT or Tri-Star Energy.

ASSOCIATE INDUSTRIES

The Company has posted Rs 70.5 million loss after tax for the year ending June 30, 2000. By virtue of the loss for the year, accumulated losses exceeds Rs 446 million. It is interesting to look at the financials of the Company. It has a paid-up capital of Rs 9.681 million and the turn over for the year 2000 was more than two billion rupees. However, the gross profit for the year came to Rs 78.759 million. Operating expenses left Rs 26.150 million which was highly inadequate to take care of financial charges amounting to Rs 92.544 million. One may wonder if the Company would ever be in a position to post profit. Therefore, there is an urgent need to raise the paid-up capital to reduce short-term borrowing/working capital loan.

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE MN)

PTCL

23.15

21.50

21.55

306,495,000

Hubco

20.40

18.85

18.95

143,373,500

SSGC

13.00

11.40

11.55

434,500

Engro

74.45

70.00

70.00

1,832,600

PSO

143.50

137.00

137.35

58,557,700

Ibrahim Fiber

21.20

19.50

19.75

7,299,000

Source: Invest Capital & Securities