THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated Feb 28, 2003

 

MARKET THIS WEEK

The KSE-100 Index, with the declining average daily volumes of 90.21mn shares, remained choppy through out the week within the range of 2,528-2,338 levels and closed at a negative note at 2399.15 on Friday for the week.

 

 

 

All major blue chips booked losses during the week where Hubco, PSO, PTCL, FFCJ, and PPTA were on the lead, declined by 1.99%, 2.69%, 3.55%, 11.97% and 5.10% respectively with higher volumes. Not even better results announced by PTCL and POL helped the Index to recover.

OUTLOOK FOR THE FOLLOWING WEEK

In our opinion the market may continue its declining trend for the time being. The war related fear in the Middle East is the primary reason behind this erosion. Sooner the war starts it would be better for the market otherwise this eroding trend can push the market below 2300. However, over sold situations in few stocks may result into some recovery in the prices. We advice day traders to stay at the sidelines till market find a firm direction.

As for long-term investments, dividend yields at current levels are attractive and most of the stocks are now trading below their fair values. However, in our opinion, it is better to enter the market after confirmation of an upward trend rather than buying it at the moment when the downside risk is much higher. A strategy of wait and see is advised, where in case of Iraq war better levels will be available to invest.

FUNDAMENTAL CHANGES

The major fundamental factors affecting the market this week were:

•Pakistan Oil Field announced its results for 1HFY03 on Tuesday, showing an increase of 23% YoY by posting a net profit of PkR1,322mn. A 100% cash payout was also announced. This however failed to impact positively on the scrip price, which declined by more than 5.3% during the week to close at PkR162. As per our expectations POL is likely to earn much better profits in the 2HFY03 owing to the increasing oil prices due to which it is likely to provide even better payouts for the year. Further price decline is likely to provide buying opportunities to the investors.

•An announcement was made by Hubco for a board meeting on March 5th to consider an interim cash dividend for FY03. This may provide food for speculation in the market next week due to which Hubco price may remain volatile. According to our expectations, the company is likely to announce an interim dividend of PkR3/share.

 

 

•PTCL announced its half yearly results during the week showing an increase of 16% in the bottom line by posting a net profit of PkR9.9bn as against PkR8.5bn last year. This was of no surprise since one of the company's official already had announced the profitability of the company for the period. Therefore the stock price remained unaffected by the news.

•Senate elections were held during the week where PML(Q) and allies won 44 out of 100 Senate seats, while opposition won 40 seats including 21 MMA and 11 PPPP seats. Most importantly, Shaukat Aziz is likely to be elevated for full minister status for another term, which is likely to be positive for over all economic outlook of the country.

TECHNICAL OUTLOOK

Break of 2,440 has developed short-term bearish potential for the market. Despite an intra-week recovery from support around 2,333, the index would still be unfolding bearish potential towards 2,250. Bullish developments come under way, as levels start moving above 2500. Among the core stocks, positive volatility would be witnessed in PSO with HUBCO being range bound and PTC a laggard under pressure.

RESULT UPDATE...ITS ALL IN THE NUMBERS

For the convenience of our investors we have briefly analyzed the results of five companies declared during last week. Although most of the results were satisfactory if not positive, the bearish sentiment prevailing in the stock market has resulted in almost minimal impact on prices. In any case, we hope that our efforts facilitate our investors to make better investment decisions.

ICI PAKISTAN — A POSITIVE SURPRISE.., FINALLY!!

ICI Pakistan's result positively surprised the market by announcing a PkR2.25/share dividend. On a recurring basis, the company posted an after tax profit of PkR723mn which is 13% higher than last year. While gross and operating profit show declining trend, both declining by 6% and 23% respectively, the company has been able to register a 13% growth. This is mainly due to the fact that the company was able to refinance its loans, which has brought down the financial charges by almost 35%.

Another notable feature of the results was the realization of deferred taxation to the tune of PkR1193mn. ICI Pakistan had maintained tax losses of Pakistan PTA at the time of the de-merger and it is these tax losses that have been realized in the current year. Although we expect deferred taxation to be a regular feature of the results until they are exhausted, we expect this amount to go down drastically in FY03, as the current year's deferred taxation amount is for two years that is FY01 and FY02.

PAKISTAN PTA — THE LOSSES CONTINUE

Pakistan PTA continues with its loss making with the company posting an after tax loss of PkR2538mn. This amount is however lower by 45% when compared to last year's loss of PkR4,598mn. This was mainly due to the improvement in PTA prices and margins which shot up to their year high of US$670/ton in June-July 2002. While the company was able to post profits at the gross level, the profitability of the company remained under strain due to the burden of high financial charges, which although have declined by 19%, are still one of the major reasons behind the losses of the company. With the full impact of the PkR6bn rights issue in FY03, we expect the financial charges to go down by approximately PkR400mn in FY03.

 

 

SSGC — DECLINE IN PROFITS YOY

SSGC's after tax profits declined by 10% (PkR69mn) in 1HFY03 to PkR605mn.

Decline in the asset base due to sell off of LPG business has been cited as the major reason cited for the decline in the profitability of the company. While both sales and gross profits have exhibited growth of 15% and 12% respectively, increase in the transmission and distribution cost by 25% is also a reason for the lower profitability of the company.

SNGPL — IMPRESSIVE PERFORMANCE

SNGPL recorded an improvement of 41% in its after tax profits in 1HFY03 over 1HFY02 to PkR957mn. The results are more spectacular given the fact that last year, the company had earned PkR192mn on account of sale of LPG business. Gross profit increased by 16% mainly on account of (I) improved gas sales, which increased by 6% and a (II) 3% decline in the cost of sales. Against our expectations, financial charges only declined by 1% as we had been expecting a substantial decline owing to low interest rate environment.

FJFC — A TURNAROUND

FFC-Jordan Fertilizer Company Limited's (FJFC) released positive results for the first time in its history, declaring a profit of PkR1.13bn in FY02 as compared to a loss of PkR3.22bn in FY01.

During the year, the company shut down its DAP plant and operated only the 440,000 ton granular urea plant. As a result the sales declined by 37% to PkR3.96bn. In spite of the fact that the entire fixed expenses were borne by only the urea operations, cost of goods sold declined by an impressive 53%, as a result of which gross profit for FY02 amounted PkR1.05bn as compared to a meager PkR8mn in FY01. Rescheduling of debt also resulted in a decline in financial charges by over PkR2.2bn and consequently profit before tax amounted to PkR152mn for FY02.

A tax write-back of PkR979mn was the single largest contributor to profit during the year. In order to facilitate the lenders and reduce the losses of the company the government has approved a compensation package of PkR5bn for FJFC, through which PkR1bn will be received each year as special government compensation. This amount has been added below the bottom line and as a result, unappropriated profits declined by PkR2.13bn in FY02. The FJFC did not declare any dividends, which given the extent of accumulated losses is hardly a surprise.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

9.62

9.44

-1.87

Total Turnover (mn shares)

837.66

451.03

-46.16

Value Traded (US$ mn.)

717.95

378.61

-47.27

No. of Trading Sessions

5

5

 

Avg. Dly T/O (mn. Shares)

167.53

90.21

-46.16

Avg. Dly T/O (US$ mn)

143.59

75.72

-47.27

KSE 100 Index

2528.31

2399.15

-5.11

KSE All Shares Index

1571.85

1497.48

-4.73

 

 

Source: KSE, MSCI, KASB