STOCK WATCH

 

 

By SHABBIR H. KAZMI
Updated Jan 18, 2003

 

At the end of the week the KSE-100 index failed to cross 3,000 level and closed at 2,915 points. Some of the market punters predicted that the index would cross the 3,000 level. However, it became evident on Thursday that weak holders would have to liquidate some of the additional load on last trading day of the week. It was a very perplexing situation as the COT rate exceeded 40% but both the Badla seekers and providers were willing to take new positions. It was the KSE risk management policy that halted assumption over exposure.

 

 

 

PAKISTAN TELECOMMUNICATION COMPANY

The company has entered the new era of de-regulation. This has ended the speculation that Pakistan Telecommunication Authority may extend the monopoly for a few more months. However, analysts strongly believe that an end to the monopoly will not have serious consequences on the company. It will take at least two to three years for the new entrant to make a mark. According to new policy the GoP will issue three fixed line telephony licenses, entrants will be asked to develop at least 10% of their infrastructure during the first year and at least 30% by the end of third year. They will also be encouraged to take on lease some infrastructure from PTCL. The overall impact is likely to be positive for the company for a number of reasons including, 1) limited licenses will provide time to PTCL to prepare to face the challenge, 2) excess capacity of PTCL can be utilized and 3) additional earnings from potential connectivity agreements. PTCL's size will give it a pricing edge and will thus be able to maintain its consumer base by offering competitive tariff.

FAUJI FERTILIZER COMPANY

Reportedly the company is in the process of taking over Fauji-Jordan Fertilizer Company (FJFC), it already owns 51% shares of FJFC. The single largest advantage of this merger for the company is likely to be that a considerable decline in effective tax rate due to FJFC's carried forward tax losses. The accelerated depreciation permissible under tax law has resulted in significant accumulated tax losses for FJFC. After the merger, Fauji Fertilizer will be able to set of these losses against its taxable profit and may not be required to pay any corporate taxes, except 0.5% turnover tax, for next three to five years. With the merger Fauji's total urea capacity will become 2.44 million tonnes per annum, approximately 57% of total urea capacity in the country. Though, the urea plants are working very efficiently, costs related to the DAP plant will continue to affect the profitability of merged entity.

DEWAN SALMAN FIBRES

The re-profiling of loans is likely to have a positive impact. As against the original borrowing at about 15% the re-profiled loans carry an average rate of 10%. The financing cost may reduce by over Rs 120 million. The company has received US$ 30 million from IFC as part of the debt re-profiling scheme. The company also plans to issue Rs 360 million Preference Shares. A portion of these proceeds will be utilized for setting up a specialty fibre project. However, the overall high debt burden is likely to keep the profitability of the company depressed in the coming years. The debts that are to be replaced through this re-profiling scheme were to be repaid during 2004-2005 and an extension of the loans would result in consistent burden of financial charges on the company going forward.

 

 

BERGER PAINTS

With the improved activity in auto, consumer durables, construction and housing sectors, due to increased consumer financing schemes along with infrastructure development by the government, economic fundamentals for the company have also improved. Berger, the second largest paint producer in Pakistan, seems to be a beneficiary of the strong economic fundamentals. However, gross margin for the first quarter of year 2003 were 22% as compared to 25% for the full year 2002. It was mainly due to increase in the cost of raw materials, mostly petroleum based. With the higher demand the turnover is expected to improve and help in achieving economy of scale.

CRESCENT STEEL & ALLIED PRODUCTS

The company has recorded a 113% growth in its top line during first quarter of year 2003 on account of increased sales to the oil and gas exploration, transmission and distribution companies. Improved demand for pipelines by oil and gas companies led to 212% increase in sales. The company also succeeded in containing its operating expenses during the quarter. That improved operating margins. Operating profit grew by 130% to Rs 110 million for the quarter as compared to Rs 48 million during the last quarter. Dividend from its associate companies led to a 467% increase in other income. The demand for pipelines is expected to remain robust due to expansion project of gas marketing companies, white oil pipeline project and OGDC's successful exploration activities. However, profits of cotton division are expected to remain under pressure. Though, the scrip offer good dividend yield, the investors may not benefit, as it is quite illiquid.

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE)

Hub Power

42.05

40.60

40.85

503,342,000

Sui North Gas

27.70

24.20

27.35

370,567,500

P T.C.L.A

26.25

25.25

25.65

272,386,500

National Bank

30.35

29.00

29.70

118,506,500

P.S.O.

239.50

232.70

238.00

106,413,300

I.C.I

62.25

59.90

60.25

48,281,600

Pak. PTA Ltd.

8.25

7.40

8.25

39,086,500

Adamjee Ins

67.55

63.40

66.50

23,328,000

Sui South Gas

20.15

17.65

20.00

10,970,000

Shell Pak

461.00

438.55

446.00

6,666,200