Updated Aug 31, 2002



Identifying the precise driving factors proves to be elusive this week. In our opinion the bulls themselves caused the KSE-100 index to increase by nearly


50 points to reach 28 month highs. Their strong buying sentiments mainly in PSO enabled the market to evade some bearish pressure particularly in Hubco.


The expected correction came and went so quickly that most people almost missed it. The KSE-100 increased by a phenomenal 2.67% this week to close at 1,974.59 points from 1,925.75 points at the end of the previous week. Trading volumes remained high with the average daily volume being 213.04mn shares. The energy sector largely controlled the market with Hubco, PSO, Shell and SNGPL being some of the most active stocks.

PSO ruled the roost with the total turnover in the scrip being 154.16m shares and its price rising by PkR23.65 or 13.21%. During August the share price of PSO has increased from PkR140.25 at August 1, 2002 to the current price of PkR202.65, reflecting an increase of 44%. While the initial price increase was supported by first market expectations and later by actual declaration of higher than predicted profits and bonus issue, we believe that the rise in price this week was driven more on speculative grounds than on fundamentals.


We continue to stress that the market is extremely overbought and the technical correction is long overdue. However, we are unsure whether the correction will come next week or the week after that, but what we are sure of is that the correction will come. At present, the bulls are running strong and in our opinion, they will continue to gain strength especially if Hubco's announcement is in line with or better than expectations. If the sentiment currently prevailing in the market continues next week breaching the barrier of 2000 points does not look so farfetched.


As we had expected, Monday saw a technical correction in the bullish trend reflected during the previous week. The KSE-100 declined by 16.10 points to close at 1,909.65 points. Most of the scrips declined as major players indulged in profit selling at the high levels with trading being considerably intense in PTCL, PSO and Hubco. The tussle between bulls and bears continued and although volumes remained high at 180.23m shares, it declined significantly from 334.39mn at the end of the previous trading week.

On Tuesday the KSE-100 offset most of the previous day's correction by rising 16.10 points to close at 1,925.71 points. Key stocks were PSO and Hubco leading in both volumes and share price gains, with the trading in the former influenced by its privatization speculation while that in the latter supported by its upcoming Board of Directors meeting. Volumes were down to 123.76mn shares.

On Wednesday, it was all PSO. Fresh buying in the scrip pushed the KSE-100 across the 1,950 barrier. Punters were largely unsure about the extent to which buying in PSO was speculative however, most of them agreed on the fact that there was considerable speculative buying for future capital gains in the stock. Although the KSE-100 would have closed beyond 1,950, profit booking in Hubco led the KSE-100 to drop by 18.02 points during the latter half of the day, and the KSE-100 closed at 1,935.93 points. All the interest generated in PSO and Hubco resulted in the volume traded to increase to 301.19mn shares. Speculative buying in PSO, buying in PTCL following rumors of higher than expected profits and dividend coupled with price increases in a number of minor scrips resulted in the KSE-100 rising by 14.87 points to close Thursday's trading at 1,950.80 points. Trading volume for the day was 226.29m shares concentrated on PTCL, PSO and Hubco.

Friday continued to be an active day with the total trading volume increasing to 233.72mn and KSE-100 rising by 23.20 points to close the week's trading at 1,974.59 points. Volume leaders were Hubco and PTCL while lead gainers were Shell Pakistan and Pakistan Oil Fields.


Tri-Pack Films Limited, a joint venture between Mitsubishi Corporation of Japan and Packages Limited, was incorporated as a public limited company on April 29, 1993. The installation of plant and machinery was completed in March 1995, trial production commenced in April 1995 and commercial production began in June 1995. Tri-Pack obtained ISO 9001 certification in 1998.

Tri-Pack manufactures BOPP (Biaxially oriented polypropylene film), which is available in thickness between 15 and 40 microns. The BOPP film may have any of the following characteristics and uses differ from one characteristic to the other:

•PLAIN: Packaging for dry food, confectionery items, stationery bags and wrappers, adhesive tapes, boxes, photo albums

•COMPOSITE: Labels, packaging material for ice bars, bread and candies, gift wrappers, book covers, shopping bags, cigarette wrapper, cassette/CD/videotape wrapper, stationery wrapper, food and chocolate box wrapper

•PEARLIZED: Packaging material for ice bars, candies and gift wrappers.

Tri-Pack has recently commissioned a second BOPP manufacturing line on May 22, 2001 that increased its capacity from 5,400 tonnes to 11,000 tonnes. With higher capacity during 2H01, Tri-Pack was able to expand production and hence increase its market share.

Revenue for 1H02 was 47% higher than in the same period last year. This may be attributed primarily to the fact that installed capacity in 1H02 was more than double that available in the corresponding period last year. Moreover, we also believe that the improved performance of consumer sector companies indicates higher demand during 1H02, relative to rather subdued consumer sector demand in 1H01 for BOPP on the back of slower economic growth in that period. In our opinion, the latter is likely to positively impact sales growth during 2H02 as well.

Gross margin for the company also improved during 1H02. We believe that the strengthening of the rupee against the dollar post 9/11 is likely to have reduced imported raw material cost per unit produced, in rupee terms. Operating expenses declined in proportion to sales indicating that the company was able to contain costs, possibly due to the semi-fixed nature SG&A expenses. On a cumulative basis, the enhanced profitability was reflected in the improvement in operating margin to 24.4% for 1H02, relative to 22.7% in 1H01.

Since the company took on redeemable capital of PkR586mn to finance its expansion on December 31, 2001 with a grace period of one year, the financial charges which accrue to this external financing became payable from 2H01. This explains the noticeable jump in financial charges over the period, which has caused a decline in net margin to 18.1% from 19.7% in 1H01.

IN SUM: We expect that in FY02, Tri-Pak is likely to continue to show the benefits of higher production capacity and improved consumer sector demand, reflected in substantial sales growth, on which we put a conservative estimate of 14%. Moreover we expect core profitability to continue to be superior in 2H02 as against 1H02 on expectations of the rupee remaining relatively stable at current levels. We forecast a 24% growth in NPAT for FY02.






Mkt. Cap (US $ bn)




Total Turnover (mn shares)




Value Traded (US$ mn.)




No. of Trading Sessions




Avg. Dly T/O (mn. Shares)




Avg. Dly T/O (US$ mn)




KSE 100 Index




KSE All Shares Index