STOCK WATCH

 

 

By SHABBIR H. KAZMI
Updated Mar 29, 2003

 

Despite increase in intensity of air strikes and ground assault by the US forces in Iraq, the KSE-100 index gained around 100 points during the week. Activity in most of the leading scrips remained high. HUBCO, PTCL and PSO remained the center of attraction. The GoP had the intention to privatize PSO during April that had also led to speculative buying of its shares. However, one has to wait for the GoP's decision, is it ready for the bidding under the prevailing geopolitical conditions in the region?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

According to Arshad Arif of KASB, "The market does not seem to be paying any attention to some interesting political developments, which may have negative impacts for Pakistan. These development include, 1) cancellation of PM visit to the US; 2) an open criticism from the political government over the recent US actions; 3) prolonged silence from President Musharraf; 4) a pro-India statement from the US undersecretary, Christina Rocca; 5) Pakistan's denial to US demand of closing down Iraqi embassy in Islamabad; 6) PM's departure to China on an unplanned visit; 7) Pakistan's announcement to establish a relief fund for Iraq; and 8) Pakistan's open criticism to a forced change in Iraqi administration. We believe that all these developments indicate that the current marriage of convenience between Pakistan and the US is once again moving towards a trouble phase."

HUBCO

The plan to link HUBCO with KESC may help the KESC in meeting electricity demand in Karachi, but is not likely to have any significant impact on the earnings of HUBCO. The power purchase tariff of HUBCO is structured in a manner that most of the return to shareholders come through the 'Equity Return Component that is based on 65% capacity load factor. Above 65% capacity load factor, HUBCO only bills for variable cost and does not include any return to shareholders. The GoP, the Ministry of Water and Power and WAPDA are the key parties that need to give this a green signal. It is most likely that electricity would be supplied to KESC and the prevailing PPA with WAPDA and does not need a separate agreement with KESC. The linking cost will have to borne by KESC. Analysts believe that it does not require laying down long transmission line. The prevailing transmission line to Jamshoroo passes close to KESC's Baldia grid station. WAPDA must make this decision because it will help in curtailing technical losses. Under the prevailing arrangements first electricity is dispatched to Jamshoro and then sent to Karachi.

 

 

ICP SEMF

The successful bidding of ICP SEMF is a great success story for Privatization Commission in the prevailing uncertain macro environment. This transaction also has a significant message for the Commission it should try to focus on those transactions that can be divested locally. The transaction shows that quality investors are interested in GoP's privativation programme and institutions are willing to offer attractive prices of these assets. PICIC's offer Rs 786 million is reasonable and may be higher than the reference price fixed by the government. However, some analysts believe that the Commission may ask the highest bidder to improve its offer.

PAKISTAN TOBACCO COMPANY

In defiance of the cutthroat competition in the tobacco sector from the tax evading companies, the financial results for the year 2002 show a stupendous performance by the company. The company has posted Rs 420 million profit after tax for the year 2002 as compared to Rs 354 million profit for the previous year. Gross turnover went up from Rs 19.8 billion to Rs 20.5 billion. Gross margin improved from 10% to 12% mainly due to a marginal decline in the purchases and expenses of raw material consumed. Operating profit surged by 48% to Rs 952 million, the highest ever operating profit in the history of the company. This can be attributed to a number of factors that include the price increases, favourable exchange rate and operational efficiency. On top of this a 19% reduction in financial charges hiked the net profit of the company for the year under review. Better cash flow enabled the company to fund its capital expenditure and reduce the total debt.

PAK SUZUKI MOTORS

The market was waiting anxiously for the financial results of the company. The scrip prices went up by five folds in a 12-month period yielding to the speculative investors fabulous capital gains. The hankering for the dividend can be gauged from the fact that as soon as the company announced the date for Board of Directors' meeting the share price went up by Rs 7 and toughed the highest of Rs 70 within four trading sessions. The announcement of results dismayed the investors that the scrip lost Rs 3.30 While the general expectation was that the company would announce around 60% dividend, the Board of Directors approved payment of 30% dividend only. This translated into a 4.76% dividend yield, much lower than the average yield of 11% offered by most of the leading scrips.

 

 

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE)

P.T.C.L.A

24.50

23.60

24.50

241,238,500

Hub Power

38.05

36.60

38.05

27,635,000

Pak.PTA Ltd.

7.80

7.35

7.80

25,366,000

M.C.B.

33.85

32.00

33.85

21,257,000

I.C.I.

50.40

47.60

50.40

20,586,500

National Bank

26.65

25.90

26.65

15,713,000

Adamjee Ins

45.80

43.25

45.00

8,427,500

Ibrahim Fib.

20.80

19.30

20.80

4,650,000

Union Bank

8.95

8.50

8.95

264,500

Askari Bank

22.00

21.60

22.00

148,500