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THE KASB REVIEW
STOCK MARKET AT A GLANCE

  1. FINEX WEEK
  2. STOCK WATCH
  3. STOCK MARKET AT A GLANCE

Updated on Aug 18, 2001

The KSE - Overview: Celebrating Independence Week!

What a difference a week can make! For the week ending Friday, August 17, 2001, the KSE-100 index was up 5.2%, market capitalization in US$ terms rose by 4.3% to US$5.05bn, and average daily turnover shot up 97.6% to 119.5 million shares, from 60.5 million last week, and that too in a week which had 4 trading sessions instead of the usual 5-days due to the 14 August holiday.

The market closed at 1290.25, up 67 points from last week's closure at 1222.85. Last week we mentioned that the market's tight range bound movement over the last several weeks demonstrated indecisiveness of the key players, who were waiting for a trigger to determine their future course of action; i.e. whether to get bullish at the low valuations or to wait for the market to drop another 100 points or so before entering to make a profit. Well, the 'trigger' has surfaced in the form of the GoP's decision to bring four large players into the market to support the bourses.

Rumors started circulating on Monday that the GoP would form some sort of a support fund for the stock exchanges. On the strength of this news, the KSE index rose by 30 points on that day, closing at 1256 levels. According to a news item, when the market opened after the 14h August holiday on Wednesday, a large foreign fund which has been preparing to extricate itself from the domestic market, sold its last tranche of 30 million share. However, institutional investors absorbed the selling order and the index went up another 11 points and closed at 1267.

On Thursday, newspaper reports indicated that the rumors had been vindicated, and the bourses could expect to get monetary support of up to PkR5bn in top picks. Indications have been given that the scrips to be supported will be blue-chips, including those which are currently lined up for privatization. The index rose to the occasion by climbing up 23 points to close at 1290.

On Friday, the market continued to rise and had travelled up 8 points intraday before falling 8 points again, to settle at 1290, remaining unchanged from closing index levels. This we feel is a good sign since it signals that some of the froth builtup was eliminated on Friday by lopping off the upward movement of the index earlier in the day. Any technical downward correction that may be due to take place next week will be weakened by this amount.

PTCL and Hubco were the most actively traded shares during the week. News reports indicated that the foreign fund sold about 60 million shares each of these two scrips over the period of a week, ending Wednesday. Adamjee's price rose by 10% to close at PkR37.10 and it too figured amongst the most actively traded scrips during the week. After MCB had declared its intention to buy a strategic stake in Adamjee, interest in the stock had dwindled and the price had languished to a low of about PkR31, these low prices perked up investor interest again as Adamjee went into the oversold region.

At this point we must mention that we would advise investors to rein in their enthusiasm and not jump on the bandwagon by becoming bullish. The whens and hows of the stock market support fund, have yet to be clarified. Furthermore, the possibility of a technical correction of 10-20 points in the near term, in our opinion, is very high. The market has jumped 67 points this week without a correction, and so an imminent correction is plausible. Small investors should thus play the market cautiously otherwise they may be susceptible to profit taking by big players.

This week the market spiraled upwards on the back of the news that the GoP will in future support the price of selected stocks by investing a substantial amount in the market. We are of the opinion that the technical correction makes for a high probability. We remain confident, however, that the time to enter the market for the small investor is when the market breaks the 1320 level with strength. Once the market surfaces above the 1320 level, in the manner already described, the index should begin its upwards climb.

Sector Review

Amalgamation of Ibrahim Group's Textile Interests

In another first for Pakistan's corporate sector, the Ibrahim Group has announced a proposed merger of four of its textile related companies via Ibrahim Fibres, Ibrahim Textile, AA. Textile, Zainab Textile and Ibrahim Energy.

The Ibrahim group continues to display its leadership in the country's corporate sector in terms of both superior management quality, vision, forward planning and impeccable implementation track record, besides being one of the very few local sponsor groups who take along their minority shareholders with them in a fair and transparent manner.

The scheme of arrangement of amalgamation envisages merging all the companies into the flagship of Ibrahim Fibres. As a result of this the other companies will stand delisted from stock exchange and IFL will be the only listed textile related entity of Ibrahim Group. The companies are currently trading on the stock exchanges at price ranging from PkR10 to PkR15 with IFL itself at PkR13.40. At present the combined market cap of the 5 companies is PkR4.12bn out of which IFL constitutes just over 82%. For the sake of argument we have armualized the already published 1H01 profit figures for these companies to arrive at the ball park estimated NPAT for the five companies at around PkR618mn for FY01. The total number of shares outstanding for all these companies combined is 317 million out of which IFL alone accounts for 250 million or almost 79%.

Thus, as a rough and ready estimate, the combined expected earning per share (EPS) of the five companies for FY01 would be PkR1.95 implying an FY01 PER of 6.7x for the consolidated entity. In comparative terms, our forecast for IFL's FY01 NPAT is PkR495mn or an EPS of PkR2/share. This also leads to a FY01 PER of 6.7x. Therefore, on face value, assuming a unitary swap ratio of the concerns, the merged entity on a consolidated basis has the same valuation as IFL alone. This of course, has to be expected, as IFL makes up 80% of both the paid up and market cap.

The combined total assets as per half-year balance sheet for the period ending March 31, 2001, were PkR11.2bn, out of which PkR8.7bn or 78% were related to IFL. Going forward, of course IFL's share would have increased substantially next year as Capex for the expanded capacity came on line. As a result, by June 2002 the assets of four other units would in any case have been marginalized.

Looking at Book Values, we find that as on March 31, 2001, the combined BV was PkR17.2/share while the stand alone book value of IFL was PkR17.5/share. So, investors' NAV also appears to remain more or less the same based on our unitary swap ratio assumption.

Stock Market Synopsis

 

Last week

This Week

%Change

Mkt. Cap (US $ bn)

4.84

5.05

4.34

Total Turnover (mn shares)

302.40

477.95

58.05

Value Traded (US$ mn.)

147.31

209.18

42.00

No. of Trading Sessions

5

4

 

Avg. Dly T/O (mn. shares)

60.48

119.49

97.57

Avg. Dly T/O (US$ mn)

29.46

52.30

77.50

KSE 100 Index

1226.84

1290.25

5.17

KSE All Share Index

791.72

826.39

4.38

 


 

ASIA PACIFIC & AUSTRALIA
EXCHANGE INDEX LEVEL CHANGE EXCHANGE

Bombay

BSE

3296.71

-41.20

-1.23%

Hong Kong

Hang Seng

11754.8

-77.63

-0.66%

Singapore

Straits Times

1636.19

+2.09

0.13%

Sydney

S&P ASX 200

3330.4

+1.80

0.05%

Tokyo

Nikkei

11445.5

-69.48

-0.60%

 


 

EUROPE & UNITED STATE OF AMERICA

EXCHANGE

INDEX

LEVEL

CHANGE

EXCHANGE

Frankfurt

DAX

5222.12

-139.80

-2.61%

London

FTSE

5342.1

-47.70

-0.89%

Paris

CAC

4777.37

-105.25

-2.16%

Dow Jones

Industrial

10240.78

-151.74

 

NASDAQ

Composite

1867.01

-63.31