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
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.
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
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
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
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.
Mkt. Cap (US $ bn)
Total Turnover (mn
Value Traded (US$
No. of Trading
Avg. Dly T/O (mn.
Avg. Dly T/O (US$
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