The market moved sideways during the week and profit taking was common. It is interesting that while total investment in COT increased, average COT rate declined. Total investment in COT increased by Rs 267 million to Rs 6.52 billion at the end of the week.

Total COT investment in PTCL decreased by Rs 160 million to Rs 1.27 billion. Total COT investment in PSO increased by Rs 121.6 million to Rs 1.37 billion. Total COT investment in HUBCO increased by Rs 120.7 million to Rs 1.46 billion.

The market is expected to register decline in KSE-100 index due to profit taking since most of the factors which have the potential to drive the index upwards have already taken into account.

The scrip has always been among the top five volume leaders. However, analysts say at now all the things are settled and its future payouts are known, the quantum of daily turnover may come down. A key factor that can potentially change HUBCO's future dividend payout is the movement of exchange rate because the payment from WAPDA are in dollar terms. In case of any devaluation of rupee shareholders can benefit or vice versa. However, the impact will be with lagged effect. In case HUBCO switches to an alternate low cost fuel, the cost saving will not result in any additional income because fuel cost is a pass through factor. Even if capacity utilization improves, due to supply of electricity to KESC, the gain can only be marginal. Saying this much, analysts strongly believe that it will remain a preferred choice of investors but certainly will have no attraction for the day traders.

The GoP has decided to privatize this upward integrated utility by September this year. Expression of Interest for the sale of 51% to 74% share have been invited by May 31, 2002. Though, efforts are being made to improve revenue and collect outstanding receivables, the achievement is lower than desired. The utility faces severe financial crisis due to inefficient financial management, power theft, reduced billing and collection and huge outstanding receivable. The increase in furnace oil prices and inadequate rise in electricity tariff have also been the reason for rising losses. According to reports international donors have also linked future lending to Pakistan with the successful privatization of KESC. The recent conversion of debt into equity seems to have improved the chances of swift and early privatization of KSEC.

The company with a capacity to produce 70,000 tonnes/annum is the second largest producing facility. With the recent merger company now has 134,170 spindles which mainly produces polyester viscose yarn. These spindles utilize nearly 25 per cent of PSF produced and remaining is sold in the domestic market. The unit is in the process of enhancing capacity to 208,000 tonnes/annum. With this expansion coming on line, two new PSF products will be added, enjoying relative higher margin. The addition in capacity is expected to create an oversupply situation. While the international demand is expected to increase in year 2003, the consumption in local market may also go higher. The company is likely to outshine other local PSF manufacturers mainly due to better cost controls and superior quality of product.

Despite an overall bad year for sugar industry, profit after tax of the company for the year ending September 30, 2001 was higher as compared to previous year. This enabled the company to improve its dividend pay out from 15 per cent for the year 2000 to 20 per cent for the year under review. Operating expenses increased from Rs 24 million to Rs 53 million and financial charges went up from Rs 48.7 million to 84.8 million. Management was able to increase number of operating days as well as capacity utilization. Industrial alcohol production unit also commenced commercial production. However, in Director's Report it was apprehended that profitability of the company may come under pressure for year 2002 due to acute shortage of water and limited availability of sugarcane.

The company has posted Rs 95 million profit before tax for the year ending September 30, 2001 as compared to a profit of Rs 72 million for the previous year. This enabled the company to double its dividend payout to 20 per cent. Even a 10 per cent dividend paid last year was not disappointing because it managed to wipe out accumulated loss of Rs 36 million brought forward. Sales increased from Rs 757 million to Rs 922 million. Gross profit improved from Rs 128 million to Rs 164 million. However, there was increase in operating expenses as well as financial and other charges. Operating expenses went up from Rs 13 million to Rs 18 million and financial charges grew from Rs 43 million to Rs 52 million.