During the week market remained bullish but not without technical correction, which was over due. The reasons for bullishness were the increase in margin of oil marketing companies and the announcement by the Privatization Commission seeking EoI for sale of 51 per cent shares of PSO by August this year. At the back of active buying Badla rate and volume remained high. The Badla volume increased to Rs 6.5 billion. The COT investment in PTCL alone was reportedly over Rs 1.7 billion followed by HUBCO at Rs 1.2 billion.

Bargain hunting on Friday led to massive selling which is expected to continue in the following week. Reportedly institutional investors indulged in profit taking. The high Badla volume demands strict monitoring and enforcing of capital adequacy requirement by the stock exchanges.

The panic buying in the scrip seems to be due to upward revision of margin of oil marketing companies (OMCs) and the GoP's pursuit to sell 51 per cent shares to a strategic investor during the third quarter of year 2002. Reportedly, the margins of OMCs have been raised from 2 per cent to 3 per cent with immediate effect and a further in margins of half a per cent will be effective from July, 2002. According to a report by IP Securities, a one per cent increase in margins for regulated products would result in an annualized earnings upside of at least four to five rupee for PSO. For the full year, the revised year 2002 EPS would likely be around Rs 8 as against an earlier forecast of Rs 6.50.

There was an increase in income for the year 2001 but not without increase in expenditure as compared to previous year. Income grew from Rs 2,320.2 million to Rs 2,948.8 million and expenditure went up from Rs 1,917 million to Rs 2,398 million. Profit after tax went up from Rs 153 million to Rs 251 million. The Board of Directors approved distribution of 5 per cent dividend and issue of 20 per cent bonus shares to shareholders.

The bank posted a lower profit before tax for the year 2001 but profit after tax was higher compared to previous year due to lower provision for tax. Profit before tax came down from Rs 12.78 million to Rs 10 million. Provision for tax for the year 2001 was as low as Rs 1.3 million as compared to a provision of over Rs 11 for the previous year.

Since details about income, expenditure and provisions against doubtful debts are not given in the announcement, it is not possible to comment on over all performance of the bank.

The bank neither paid any dividend for the previous year nor for the year 2001 as most of profit was used for issue of bonus shares. Profit after tax improved, from Rs 178.4 million for the year 2000 to Rs 271.4 million. The Board of Directors approved issue of 30 per cent bonus shares and transferred Rs 54 million to statutory reserve. The bank also issued 25 per cent bonus shares out of the earnings for the year 2000.

Announcement of 25 per cent dividend must have been a pleasant news for the shareholders. On top of this, the company also wiped out its accumulated losses of Rs 203.2 million by transferring Rs 205.3 million from general reserve at the close of its financial year ending on December 31, 2001. This seems to be a turnaround as sales went up from Rs 2,081 million to Rs 2,347 million. A better control on cost of goods sold improved gross profit from Rs 561.4 million to Rs 721.8 million. Though, there was increase in selling and administrative expenses, it was compensated by increase in other income which went up from Rs 23.6 million to Rs 50.7 million. While financial charges reduced to half, other charges went up from Rs 15.5 million to nearly Rs 25 million. Basic earning per share improved from Rs 0.38 for the year 2000 to Rs 2.47 for the year under review.

The company seems to be in some trouble because accumulated losses as at September 30, 2001 were over Rs 994 million. The company posted Rs 77.6 million loss before tax for the year 2001 as compared to a profit of Rs 116.5 million for the previous year. The factors responsible for the loss were decrease in other income, an unusual loss and increase in financial charges. Other income came down from Rs 70 million to Rs 22 million. While there was an unusual gain of Rs 122.5 million during year 2000, the company registered an unusual loss of Rs 55.7 million. Financial charges hiked from Rs 114.5 million to Rs 175 million. Over the last two years the company has been trying to wipe out accumulated losses by transferring funds from reserves. During year 2000 a sum of Rs. 159 million was transferred from general reserves. Yet a higher amount of Rs 201.8 million was transferred capital reserve to lower the burden of huge accumulated losses.