BANK ALFALAH

After leasing companies, the commercial banks have also entered into the arena of TFCs market. The entrance of banks in this market would not only lead to a significant increase of the size of the market but also help in raising the average maturity of the outstanding debt instruments. After Muslim Commercial Bank, others in the queue are Bank Alfalah (BAL) and Union Bank. The public subscription for Bank Alfalah's TFCs will start on December 19, 2002 and will remain open till December 21, 2002. The most attractive feature of the BAL's issue is that despite the fact it is an unsecured TFC, not backed by any asset, the rating of A+ by PACRA denotes not only the high quality of its debt paying ability but also the improved financial outlook of the bank. The instrument is a floater with returns pegged to the last cut-off yield on a 5-year PIB and a 1.35% spread over and above the base rate. Because of the blue chip status of the bond, it is likely to attract considerable trading in the secondary market.

KARACHI ELECTRIC SUPPLY CORPORATION

The recent reduction in power tariff by 12 paisa would have a negative impact on the top line of the ailing utility, around Rs 750 million. Therefore, it will be correct to say that other issues facing KESC are comparatively small when compared with the loss of revenue due to operational inefficiency. One such issue is exceptionally high and constantly increasing transmission and distribution losses. These losses were close, to 42 per cent or 393 basis points higher compared to last year. Fuel cost remained high during the year 2002. While prices of furnace oil eased, a higher utilization of natural gas for electricity generation coupled by a 15 per cent increase in natural gas prices caused increase in fuel cost, going up from Rs 17,717 million to Rs 19,273 million. There was marginal decrease in electricity purchased, from Rs 13,780 million to Rs 13,191 million. Financial charges increased by 25 per cent during the year 2002. However, the charges declined by over 78 per cent during first quarter of year 2003 as the GoP guaranteed loans under Financial Restructuring Plan were finally converted into equity. KESC's financial restructuring was a good signal for investors with respect to the future profitability of the utility. However, growing inefficiencies in operations and the recent tariff cut will negate the benefits. The decision of the government to make NEPRA subservient to the cabinet is negative and raises apprehensions about the autonomy of the various regulatory authorities.

NISHAT MILLS

The company not only offers fairly decent dividend yield but also provide opportunities to make capital gains. The company drives strength from: its size, diversification and proactive management. It is the first Pakistani textile company to enter aggressively into the European Union market. The company is expected to benefit from declining local price of raw cotton and increasing international price of cotton yarn mainly due to its size. Nishat Mills is the largest textile composite unit with 1.73 million spindles, 284 Sulzer looms, 244 Airjet looms along with dyeing and stitching units. Continuous upgradation of technology has made it one of the best-equipped textile unit in Pakistan and to effectively compete in the free trade environment. An analysis of its performance for the nine-months of year 2002 indicates an increase in salary expenses and depreciation by 30% and 40% respectively. Since the capacity expansion in the spinning division took place towards the tail end of year 2001, the full impact of enhanced depreciation would be visible in year 2002. The reduction in export financing and short-term borrowing cost are expected to decline going forward. Since the company exports more than 80% of its output and has the option to pay only turnover tax on its total sales, tax incidence is expected to he higher.

CENTURY PAPERS

During the year 2002 the company recorded a tremendous improvement in performance and profit after tax registered 49% growth. Though its first quarter results of year 2002 indicate a growth of only 3% as against the last quarter and no notable increase in margins, the prospects for better full year 2003 earnings are bright. Given the positive outlook of economy and declining interest rates scenario, the demand for paper and board is expected to remain robust. Paper prices in Pakistan are strongly correlated to the Asian region prices and the company may also see a recovery in prices and be able to post healthy revenue growth. The company has sufficient financial leverage to benefit from declining interest rates. However, volume growth is pendent on the company's ability to time its capex rollout, since it currently suffers from capacity constraint.

MOVEMENT AT A GLANCE
SCRIP	HIGH (Rs.)	LOW (Rs.)	CLOSING  PRICE	TURNOVER  (SHARE)
Hub Power	30.80	29.75	30.80	391,758,000
P T.C.L.A	24.90	23.85	24.90	177,701,000
FFC JORDAN	9.30	8.95	9.30	91,575,500
P.S.O XDXB	185.40	182.10	183.40	84,534,900
National Bank	27.10	26.20	27.10	59,567,000
Fauii Fert	68.20	64.25	68.20	40,258,900
Engro ChemSPOT	77.30	75.60	77.30	31,243,800
Adamjee Ins	62.30	54.70	59.50	28,500,000
M.C.B.SPOT	35.00	32.95	33.35	17,939,000
Shell PakXD	323.40	321.50	321.50	1,624,400

 

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