STOCK WATCH

 

 

By SHABBIR H. KAZMI
Updated Aug 03, 2002

 

This week was not very different from previous weeks. The KSE-100 index remained range-bound. Some analysts term this behaviour to the involvement of leading brokers to overcome the situation caused by the recent policy decision, pertaining to their directorship on the board of directors of listed companies and financial institutions in particular.

 

The equities market crisis in the US followed by other markets seems to have no relevance with Pakistan. Mainly because most of the listed companies are insulated against the crisis faced by technology and telecommunication related companies.

The financial results announced by the two leading fertilizer companies mainly led to profit taking. The companies which have the potential to push the market up are HUBCO and PTCL, are yet to announce their half yearly results.

PAKISTAN TELECOMMUNICATION COMPANY

There has been widespread talk that WorldCom, the bankrupt US telecom company, will default on its international settlement payments to PTCL, adversely impacting the company's revenue and bottom line. According to a report by Taurus Securities, "PTCL has large annual receivable settlement balance on its international operations, which is an important part of its total revenue. Settlement receipts from WorldCom currently account for 22 per cent of PTCL's annual international revenue, which is equivalent to US$ 65 million. Payments are settled quarterly and PTCL's maximum receivable from WorldCom at any point in time would be around US$ 16 million or Rs 960 million. WorldCom has paid its last payment on time in June 2002 and the payment for the next quarter will be due at the end of September this year. PTCL management does not foresee any risk of default and has not diverted its traffic to other US carriers. We believe that WorldCom will continue to make payments to PTCL, as defaulting on PTCL and other business partners' payments would make it impossible for WorldCom to normally operate and thus defeating the whole purpose of Chapter 11 protection."

ENGRO CHEMICAL PAKISTAN

Engro's profit before tax for Jan-June period increased by 80 per cent at the back of 40 per cent increase in sales as compared to the corresponding period of last year. Profit amounted to Rs 471 million which was partly offset by Rs 57 million loss made by the NPK operation. The company also announced 20 per cent interim dividend. While some analysts term this payout an indicator of the uncertainties shrouding the sector, they ignore two factors. Historically, the company has been paying around similar interim dividend and followed the same despite improvement in bottom line. However, the over 40 per cent increase in sales may be attributed more to the lower sales during the corresponding period of last year. Contrary to Fauji Fertilizer, Engro's cost of goods sold increased at a rate less than the increase in sales, resulting in improvement in gross margin. A 21 per cent increase in tax rate to 31.5 per cent is due to expiry of the income tax exemption that the company has been enjoying on its expansion.


FAUJI FERTILIZER COMPANY

The company enjoying the largest share of fertilizer market has registered 4.7 per cent increase in profit after tax during Jan-June period of year 2002. It also declared second interim dividend of 30 per cent making the total payout 55 per cent so far. The 22.7 per cent increase in sales may be attributed to higher sales volume and 3 per cent increase in urea prices since January this year. A 29 per cent increase in cost of goods sold caused decline in gross margin. The decline in operating margins highlights the relatively difficult operating environment. The 32 per cent decline in other income is due to enhanced lending to FFC-Jordan, the acquisition of Pak Saudi Fertilizer Limited (PSFL) and decline in interest rates. The mark-up costs of PSFL's merger were not reflected in half yearly results. However, financial charges are expected to increase significant during the second half of this year.

SITARA CHEMICALS

Pakistan's largest caustic soda producer has posted Rs 212 million profit after tax for the year ending June 30, 2002 as compared to a profit of Rs 222 million for the previous year. As compared to the dividend payout of Rs 5.5 for the previous year, the company has not announced any dividend for the year 2002. The slight decline in margins can be attributed to the swelling financial charges resulting from profit payment to the investors of the company's previous privately placed MTFC. The new caustic soda plant is likely to commence its production by October this year. This expansion is expected to boost revenue for the year 2003. However, the net margins may remain under pressure as the company would not be in a position to pass the full impact of the cost increases to consumers in near future.

-ComDanv High Low Closinq Week's Turnover

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE)

Hub Power

24.40

24.15

24.25

35,274,000

P.T.C.L.A

17.75

17.60

17.65

16,073,500

Engro Chemical

61.20

59.25

59.25

11,978,600

Fauji Fert

50.05

48.05

49.25

10,719,400

I.C. I.

38.80

37.95

37.95

4,994,000

K E S C

4.80

4.70

4.75

4,575,000

M C B

23.95

23.65

23.65

3,252,500

National Bank

21.65

21.25

21.30

1,346,500

Adamjee Ins.

35.05

34.65

34.65

1,114,000

Askari Bank

20.05

19.90

20.05

181,000