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By SHABBIR H. KAZMI
Updated Nov 24, 2001

The week witnessed a major fiasco at Karachi Stock Exchange (KSE) when the announcement regarding approval of final dividend by HUBCO lenders made by the exchange was denied by the Company. This clearly reflects the fragility in the existing corporate governance system at the KSE. Historically HUBCO has been the pick of market manipulators but this time KSE platform was used. Therefore, it is necessary to find out who were responsible for tampering and forging of price sensitive information and to also impose strict penalties on all those who are found involved in the scam.

During the week the KSE-100 index lost 22 points. Average daily trading volume remained low for a number of reasons. However, volumes in cement sector, particularly Lucky, D. G. Khan and Cherat were high. The market is expected to remain firm in coming days. Trading in HUBCO resumed on last day of the week.

NATIONAL BANK OF PAKISTAN

The offer for sale of 5 per cent shares of GoP in National Bank of Pakistan (NBP) has received record subscription. As against an offer of 18 million shares, subscription for 60 million shares have been received. The NBP is set to become the second of Pakistan's five banking giants to be listed on the Karachi Stock Exchange, after the listing of Muslim Commercial Bank (MCB) almost a decade ago. Similar to the other giants, the bank's recent history was a sad one. NBP has a much larger 'zero-cost' funding base and maintains a positive interest margin, wherein its other funds are relatively more expensive than its yields on average earning assets. This advantage is mainly derived from NBP's unique role as the SBP's and GoP's banker, and from mandatory deposits placed by other banks. NBP has the larger foreign branch network. According to a KASB report, capital adequacy ratio (CAR) of NBP is 8.2 per cent of risk adjusted assets, but given the probability of a large number of NBP loans being to public sector entities with a GoP guarantee, its CAR is likely to be much higher. However, this may not remain so in the long run because the SBP is expected to introduce new guidelines by January 2002, which would require a weightings for GoP guaranteed debt. This may put NBP under capital constraints, limiting loan book growth in a low interest rate environment, and hence impact on its margin management capacity. NBP's public sector status leaves it open to abuse by the government for purposes other than the profit margin. Instances like the merger of NDFC into NBP act as value destroyer and may affect future profitability.

ASKARI LEASING

The Board of Directors have decided to skip dividend payment for the year ending June 30, 2001, last year 20 per cent was paid. Profit after tax for year 2001 was Rs 64.48 million as compared to that of Rs 91.45 million for the previous year. Revenue increased from Rs 992.7 million to Rs 1,171.6 million but expenditure increased from Rs 862 million to Rs 1,033 million. At the same time, allowance for potential lease losses jumped from Rs 30.6 million to Rs 60.9 million during this period. This clearly indicates that expenditures are getting out of proportion.

KOHINOOR ENERGY

The Board of Directors have decided skip dividend payment for the year ending June 30, 2001, despite profit after tax amounting to Rs 503 million. The company also did not pay any dividend last year. Sales for year 2001 were marginally higher than previous year. Cost of sales, administrative and general expenses were lower as compared to previous year. However, financial charges went up. It is interesting to note that while cost of sales for the year under review were Rs 724 million, financial charges were Rs 450 million. This clearly indicates gross weakness in cashflow. In the absence of detailed accounts, it is not possible to determine whether higher financial charges were the outcome of huge receivables or excessive lending to associate companies.

GHANDHARA NISSAN DIESEL

The company has managed to reduce loss after tax for the year ending June 30, 2001 as compared to previous year. This was possible mainly due to reduction in financial charges, which came down from Rs 37 million for the year 2000 to Rs 19.4 million for the period under review. Loss per share also came down from Rs 7.25 to Rs 2.99 during this period. Accumulated losses as at June 30, 2001 amounted to Rs 111 million. The Board of Directors have also approved issue of Right Shares at par, three shares for every five shares held. The purpose of further issue of share capital is to meet working capital requirements. The equity holders of the Company are: Ghandhara Nissan (36.4%), Bibojee Services (5.7%), Nissan Diesel Motor Company of Japan (15%), Tomen Corporation of Japan (10%), National Investment Trust (20.4%) and general public (12.5%).

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE)

Hubco

20.15

19.25

19.50

142,780.000

PTCL

18.25

17.35

17.70

87,762,000

SNGPL

11.80

11.05

11.20

11,592,500

D.G. Khan Cement

7.05

6.30

6.95

10,499,500

Engro

57.65

53.75

54.80

5,307,200

Fauji Fertilizer

41.60

39.85

40.25

4,988,400

Adamjee

37.85

33.50

34.35

4,402,000

SSGC

11.50

11.30

11.00

718,500