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By SHABBIR H. KAZMI
Updated Aug 04, 2001

The week under review was not very different from previous weeks. The average daily volume increased but activity remained confined to a few scrips. The market also awaits approval of dividend payment by HUBCO lenders. Some analysts forecast for a turn around as Pakistan seems to be ready to enter meaningful discussion with the IMF for PRGF programme. However, some of the announcements regarding half yearly results and dividend payment prompted retail investors to revisit equities market as prices look attractive. More positive news are expected in the days to come.

KARACHI ELECTRIC SUPPLY CORPORATION

The utility responsible for supplying electricity to Karachi, the hub of industrial and commercial activities continues to face precarious financial position. Recently a consortium of government owned banks advanced over Rs 4 billion. Since the utility is on privatization list, the GoP is trying hard for its financial restructuring. With limited inflows from domestic and international financial institutions and huge revenue losses, the utility finds it impossible to undertake any development work. A KASB report stresses operational restructuring as important as financial restructuring. The huge T&D losses has severely hampered revenue generation capability of KSEC. The inability to deal successfully with this issue coupled with high cost of generation, due to rising oil prices, have resulted in circular debt problem for the power sector. With NEPRA's refusal to allow hike in electricity tariff and a forecast for increase in oil prices, margins of KSEC are expected to shrink further. WAPDA also faces a similar situation. If these problems are not resolved, state-owned utilities are expected to default in their payments to IPPs.

FAUJI FERTILIZER COMPANY

As expected, the Company has announced second interim dividend of 25 per cent. The total payout to date comes to 55 per cent and with five months to go till year end, the final dividend payout is expected to be in line with analysts' forecast of 70 per cent. Apprehensions regarding dividend payout ability of the Company seems to be on the decline. According to a report by IP Securities, full year results would be better than the year 2000. During the previous year fertilizer offtake was low and hike in gas price reduced margin. The Company has recorded Rs 4.76 billion sales during the first half of 2001 as compared to a turnover of Rs 4.31 billion for the corresponding period of the previous year. Gross margin improved by 48 per cent and cost of goods sold went down by 4.8 per cent. With an expected profit after tax of over Rs 3 billion for the full year and a dividend yield of 19.7 per cent, the scrip is trading at a substantial discount to all fundamental benchmarks and remains pick of the current market.

HUBCO

The plan by WAPDA, Vision 2025 expected to cost over US$ 45 billion, may seem very ambitious to some but it is need of the time. The plans of the GoP to utilize sources other than imported oil for power generation would prove beneficial for the country. HUBCO has operated at almost 100 per cent capacity for most of this year, compared to its minimum required capacity of around 67 per cent. With the recent rains and more than adequate water in dams the high level of capacity utilization by the IPPs this year may not be there. Still analysts forecast for over 30 per cent dividend for the full year. The scrip price has remained low due to delay in formal approval by the lenders for the payment of dividend, though it has been termed only a ritual.

AL-GHAZI TRACTORS

The Company has released its half yearly accounts for the period ending June 30, 2001. Profit after tax amounts to Rs 613.8 million as compared to a profit of Rs 578.8 million for the corresponding period of previous year. The set sales and expenses were more or less same. However, the Board of Directors preferred not to declare any interim dividend whereas, 100 per cent dividend was paid in June 2000. It seems that the Company preferred not to distribute any dividend to shareholders due to some expected but non-recurring expense. Tractor sales are expected to pick up due to better prices of crops and higher production. The expectation is based on the forecast that a near-drought like situation is over.

GILLETTE PAKISTAN

The half yearly results for the period ending June 30, 2001 indicates an increase in sales and profit before tax over corresponding period of previous year. Sales have increased from Rs 234 million to Rs 342.6 million and profit after tax from Rs 21.4 million to Rs 39.4 million during the period under review. The increase in sales was partly off set by higher administrative and selling expenses a jump from Rs 77.8 million in the previous year to about Rs 94 million. However, the adverse impact was lower due to reduction in financial charges and increase in other income as compared to previous year.

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE MN)

PTCL

15.65

15.05

15.50

109,008,500

Hubco

16.75

15.85

16.50

75,663,000

Engro

53.75

4930

53.70

15,701,900

Adamjee

43.50

39.60

41.70

11,759500

Fauji Fertilizer

36.15

34.25

36.00

7,592,000

MCB

21.60

20.60

21.35

7,547,000

World Call

13.45

12.55

13.10

2,780,500

Dawood Herculas

78.90

75.05

76.00

39,500