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By SHABBIR H. KAZMI
Updated Aug 18, 2001

At last the government has decided to establish a Market Stabilization Fund (MSF) amounting 4.5 to 5 billion rupee and the main source is a consortium of government owned commercial banks and financial institutions. The aim to extend support through institutional buying if undervalued shares. However, analysts warn that real value of a scrip is quite subjective as it is based on a unique judgment about its future earnings plus historical valuation by the market.

PRUDENTIAL COMMERCIAL BANK

The Bank has posted Rs 837 million loss after tax for the full year ending December 31, 2000. While income before operating expenses came to Rs 128 million, operating expenses were Rs 192.5 million. However, the real havoc was Rs 723.6 million provision against non-performing advances resulting in Rs 867 million loss before tax. It was also resolved to raise the paid-up capital of the Bank to Rs 750 million up to December 31, 2001. The Board approved the issue of Right Shares of the Bank in the ratio of two shares for every one share held to provide additional equity of Rs 1,000 million so as to recoup the negative equity of Rs 217 million as at December 31, 2000 and to have adjusted capital as per requirement of State Bank of Pakistan.

FFC-JORDAN FERTILIZER

In a meeting of Board of Directors held on August 9, it has been decided to discontinue DAP production to cut down the losses. However, production of urea will continue at enhanced rate. In the same meeting financial results for the half year ending June 30 were reviewed. The Company has posted gross loss of Rs 173 million for this period as compared to Rs 751 million for the corresponding period of previous year. Profit after tax for the first half of 2001 was Rs 1.7 billion as compared to that of Rs 2.3 billion for the first half of year 2000. As a result of persistence loss the equity has become negative Rs 1.578 billion. The Company has a paid-up capital of Rs 3,341 million, capital reserve of Rs 228.350 million and accumulated losses of Rs. 5,147 million. The major reason for closure of DAP plant is very low international price of the commodity. The Company had approached the GoP to impose regulatory duty on imported DAP which was denied. While the closure of DAP plant may help the Company to save losses related to its production, depreciation and debt servicing charges related to this division will continue to keep margins under pressure.

DAWOOD HERCULES CHEMICALS

In a recently held meeting of Board of Directors to review half yearly financial results, an interim dividend of 35 per cent was approved. It was also decided to transfer Rs 80 million for issue of bonus shares in the ratio of one for five. Sales for the six-months period were lower than that of corresponding period of previous year. There was an increase in gross profit due to optimization of cost of goods sold. The profit was further improved due to increase in other income. With the increase in gas available with SNGPL, capacity utilization of the plant is expected to improve further.

KNOLL PHARMACEUTICALS

The Company has posted Rs 63.5 million profit before tax for the first half of year 2001 as compared to a profit of Rs 56.7 million for the corresponding period of previous year. Sale increased from Rs 355 million to Rs 386 million during this period. However, the advantage of improved gross profit was eroded due to increase in administrative, selling and distribution expenses. At the same time other income also improved. Earnings per share improved from Rs 1.60 for the first half of year 2000 to Rs 1.75 for the period under review. Profitability of pharmaceutical companies has been eroding due to depreciation of rupee and inflation because corresponding increase in price of medicine has not been allowed by the government.

HUBCO

According to a KASB report the scrip is currently trading at a steep discount to regional power companies. It has under-performed due to delays in disbursement of announced dividend as well as bouts of foreign selling. With country risk and sector risk likely to reduce significantly over the next six months, the scrip is poise for a rerating. The first half results show significant improvement in financial health of the Company. Increase in sales was driven both by higher furnace oil price (a pass-through cost) and higher offtake of electricity by WAPDA due to reduced hydel power generation. Since the scrip has a large free-float, introduction of T+3 has pushed weak position holders to sidelines. While there are bright chances of Pakistan entering into PRGF programme, the key risk is WAPDA's ability to discharge its obligation towards the IPP. The plus point is that WAPDA's financial condition has been improving and the probability of default is low.

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE MN)

PTCL

16.45

15.25

16.30

145,805,500

Hubco

16.90

15.85

16.60

129,340,000

PSO

132.45

122 50

130.50

42,718,800

Engro

54.45

49.65

54.30

16,617,000

MCB

24.00

21.35

23.90

10,959,000

Fauji Fertilizer

37.75

35.50

37.40

8,342,200

BOP

8.75

7.90

8.65

2,077,000

Askari Bank

13.20

12.40

12.95

645,000

Faysal Bank

7.90

7.25

7.40

69,500

Union Bank

6.75

6.15

6.75

25,500