The market continued its sideways movement during the week. However, it recovered from the downslide experienced last week to a large extent. It also became visible that last week's movement was linked more with the settlement rather than tension created by war hysteria by India. A series of missile tests gave further courage to local investors regarding Pakistan's ability to respond effectively to any adventurous move by India.

The prices of a number of blue-chip shares witnessed substantial erosion in value and now offer incredibly attractive dividend yield. Therefore, it is an ideal time to accumulate on weakness. The successful completion of Pak Saudi Fertilizer transaction should provide a boost to the ongoing process of privatization.

A large number of textile companies have announced their financial results. The half yearly and quarterly results indicates a decline in sales volume and higher cost of production resulting in lower profit margins. This is not surprising because most of the Pakistan's major export markets were suffering from synchronized recession. The good news is that there are visible signs of recovery in the US market, which also has the potential to boost economies of other developed countries.

Another good news is that textile manufacturers in the US are winding up their business. This provide opportunity to Pakistani investors to acquire these plants at considerably low cost as well as form joint ventures with the US companies. These means transfer of technology and guaranteed sales.

There are concerns that private sector borrowing in the country has not grown. However, this should not be a real concern. According to some latest reports fresh investment in the US has also been at a very low level. Despite almost zero interest rate in Japan for a very long time, investment has not picked up.

Reports indicate that now the competition is among the four bigs for acquiring 51 per cent shares of the giant oil marketing company. These are Kuwait Petroleum Corporation, Caltex, Dawood Hercules and Shell (an indirect participant in the race). The bidders are expected to be short listed by middle of June and the entire sell off process to be completed by end August. Analysts indicate a Rs 10.00 per share dividend for the year 2002, in line with last year's payout. The economic fundamentals continue to remain strong. At current prices, the scrip offers very attractive dividend yield.

The company has agreed to lower its tariff from 5.57 cents/kwh on a 22-year project life basis to 5.19 cents/kwh on a 30-year project life basis. The company has also agreed with WAPDA on the final draft of the PPA Amendment. The GoP, through Ministry of Finance, has also approved long-term financing of the company. Financial restructuring of the company has been arranged with the NBP and the documents will be signed shortly. With a gradual rise in dispatches to WAPDA the bottom line is also expected to improve further. Exceptionally high financial charges had been affected the profitability of the company in the past but after the financial restructuring and boost in dispatches, the margins are expected to improve significantly.

The company has called an EoGM to consider the purchase of the outstanding shares of Worldcall Multimedia (WML) and Worldcall Phonecards (WPL) such that the associated companies become wholly owned subsidiaries. WPL and WML are currently small associate companies of Worldcall Communications. WML began commercial operations in December 2001. The project is still in gestation period. WPL has been in operation for almost three years. Lately sales have increased due to issue of NWD calling cards as well as due to O&M contract with PTCL. They have not preferred the merger, may be, due to being a lengthy legal procedure.

The company is an upward integrated textile unit. Apparently the reduction in profit was due to recession in its main markets. The half yearly financial results indicate reduction in sales, a fall from Rs 567 million to Rs 483 million. Gross margin also came down from Rs 103 million to Rs 84 million. Profit after tax was as low as Rs 1.3 million as compared to a profit of Rs 18.9 million for the corresponding period of last year. The bottomline is expected to improve for the full year.

This is a composite unit and managed to improve its sales during September-March 2002 period but profit before tax came down significantly. This reduction can be attributed to a cumulative effect of increase in cost of goods sold, operating expenses and financial and other charges. With the signs of recovery in its key markets, the company is expected to post better results for the full year.