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By SHABBIR H. KAZMI
Updated Jan 22, 2001

The stock market is expected to remain under selling pressure amid fears of a possible head-on collision with the SECP on the amendments issue after the KSE members indicated inclination towards a legal battle. Weak holders are also trying to off load their holdings in anticipation of T+3 settlement system and almost all the volume leaders are expected to witness selling pressure in the following weeks. After the presentation by the ICI Pakistan at KSE and demerger scheme being better understood by the investors the accumulation of shares by the profit takers have lost the zeal. It may be true that ICI is not overvalued but the buying euphoria created in the scrip by manipulators seems to be ending. All eyes are set on the upcoming meeting of the Board of Directors of HUBCO.

ICI PAKISTAN

The Company held a presentation at the KSE, explaining to brokers and financial analysts, the complex method which the company proposes to hive off the PTA arm into a separate company. The company's demerger is a three step scheme: 1) separating the existing balance sheet into PTA and non-PTA business in the ratio of 80:20, reducing the existing paid up to half to write-off the losses from the existing balance sheet and purchasing of 25 per cent shares of PTA company by the Non-PTA company. The analysts say that the valuation would depend on whether the demerger creates additional wealth for the existing stockholders of ICI Pakistan. Following the completion of demerger, non-PTA company would not be liable for huge PTA-related debt and would also benefit from less leveraged balance sheet.

PAKISTAN STATE OIL

The Board of Management of Pakistan State Oil Company has approved acquisition of 12 per cent equity in the new white oil pipeline. While the pipeline project has been in limelight for a long time the need for the facility is getting acute. The three oil companies are actually do not compete but complement each other. Each company has its own strengths and weaknesses. PSO still has the largest infrastructure and its paid-up capital allows it to undertake further investment in oil storage and transportation facilities. The concept of transpiration of finished products by road/rail lorries is not only expensive but more cumbersome.

GHARIBWAL CEMENT

The Company has posted Rs 18.8 million profit before tax for the year ending June 30, 2000, as compared to Rs 152 million loss before tax for the previous year. This has reduced the accumulated loss to slightly more than Rs 434 million. There was significant improvement in sales which resulted in Rs 121 gross profit for the year 2000 as compared to a gross loss of 57 million for the previous year. This clearly indicates improvement of fundamentals for the unit as well as for cement factories operating in the northern region.

PAKISTAN SLAG CEMENT

The Board of the Directors of the Company has proposed payment of 5 per cent dividend for the year ending June 30, 2000 despite posting a loss after tax amounting to over Rs 6 million. This was possible due to prior year tax adjustment of Rs 11.7 million by virtue of which the Company was able to post Rs 5.6 million profit after tax. The dividend amount payable works out Rs 3.2 million. The Company is involved in manufacturing of slag cement, having a different use as compared to ordinary portland cement, for which raw material is provided by Pakistan Steel.

ENGRO CHEMICAL

The recent buying in urea stock prices is driven by the perception that sector fundamentals have turned around and their year long recessionary period is over. A good offtake coupled with better prices will have a positive impact on year 2000 earnings. According to a report by KASB, Engro's gross margins are expected to move up to 36 per cent from earlier estimate of 32 per cent. The volume traded in Engro shares for the week was higher than that of Fauji Fertilizer. This was contrary to the past trend. Engro has lower paid-up capital as well as free market float compared to Fauji. Does it indicate that brokers are making efforts to create a buying euphoria in the scrip in anticipation of the board meeting expected to be held in the near future.

FAUJI FERTILIZER

The share price of Fauji seems very attractive but somehow the other daily trading volume has remained very low, as compared to the levels in the past. Analysts attribute two reasons for this phenomena: the scrip was a pick of market movers in the past, simply due to its huge market float, and the performance of FFC-Jordan. FFC-Jordan posted over Rs 2.3 billion loss in last six months and investors became a little skeptical about the earnings of Fauji. Fauji has 30 per cent equity stake in FFC-Jordan. However, according to reports from fertilizer market, a hike in local DAP sale price is expected to keep FFC-Jordan's loss at much lower level.

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE MN)

PTCL

21.60

21.00

21.35

149,036,500

Hubco

19.40

18.70

19.05

103,107,500

ICI

10.65

9.30

9.50

73,790,000

Engro

72.20

65.55

72.10

48,598,500

Fauji Fertilizer

46.85

43.45

46.80

35,752,200

Pioneer Cement

3.25

3.00

2.90

40,000

Gharibwal Cement

4.05

4.05

4.05

Source: Invest Capital & Securities