STOCK WATCH

 

 

By SHABBIR H. KAZMI
Updated July 26, 2003

 

Allied Bank of Pakistan is once again up for sale. This time, the Central Bank is handling the issue itself. Reportedly, 12 parties have submitted expressions of interest for this bank. Almost all the parties seem to be serious contenders for the bank. In particular, the interests from United Bank, Bank of Punjab and Askari Commercial Bank indicate that these entities are interested in further expansion of their interest in banking sector. With a higher level of interest among the parties, sale of the bank is likely to be completed within the current financial year.

 

 

 

Privatization of Habib Bank's has also received good response. More or less the same groups have filed EoIs. However, the two most serious parties seem to be Qatar Bank and the Agha Khan Foundation. Although, the existing large banking players are also in the run, some analysts are of the opinion that the Central Bank as well as the government would prefer an international party for this bank owing to the factors that influenced privatization of UBL.

In the current situation, the investors need to be careful about the future structure of the banking sector. From the various initiatives by the smaller banks, it is evident that everyone is presently focusing on expanding its branch network. Acquisition of big banks like ABL and HBL can expand any of these banks overnight. The retail-banking model demands a comprehensive branch network. Apart from raising deposits at lower costs, the key issue in the future banking model would be the distribution network for retail products.

PAKISTAN PTA

After recovery in first quarter, PPTA took another nosedive in second quarter. The company has posted Rs 900 million loss after tax for the first half of 2003. While the results show a recovery over the corresponding period of last year, the financial performance was affected adversely in second quarter of 2003. The company had posted Rs 57 million for the first quarter, which swelled to Rs, 843 million for the second quarter. While financial charges came down considerably, as a result of an equity injection and debt restructuring, the decline in margins adversely affected the company. Financial charges declined by almost 60%, from Rs 1,306 million for the first half of 2002 to Rs 532 million for the period under review. Both volumes and prices witnessed a sharp decline due to SARS outbreak in China. PTA prices also crashed due to fall in crude oil prices. Lately, PTA prices have improved and third quarter results are expected to be better than second quarter as the offtake by China has improved.

IBRAHIM FIBRE

The company has posted Rs 414 million profit after tax for the first nine months of ongoing financial year. Keeping in view that expansion plant has become operational the growth in bottom line looks disappointing. The depressed profitability for the third quarter can be attributed to decline in PSF prices with the end of Iraq war. However, the real factor affecting margins has been the stiff competition in the country. PSF prices crashed after the end of the Iraq war. In addition, reduced demand from China affected overall regional demand which in turn also negatively affected prices. In the domestic market, PSF consumers reduced their PSF purchases in anticipation of a decline in PSF prices. PSF prices, which had shot up to Rs 80/kg during Jan-Mar 2003, declined to Rs 60/kg within 4-6 weeks. With price competition heating up, the profitability of the industry is likely to be negatively affected. While other PSF manufacturers raised their prices to pass on the impact of increased raw material costs to the end consumer, Ibrahim opted to maintain its price. With the relative cost efficiencies enjoyed, the margins of the company are likely to be similar to those of other PSF producers even at the reduced price levels. Ibrahim is in a position to sustain this low price for some time as it normally leads to an increase in market share.

 

 

HUBCO

The company is expected to announce it full year results by end August or early September. Analysts forecast final distribution around Rs 2 per share. The company has already announced a Rs 3.30/share dividend along with its half-yearly results. With the speculation over HUBCO supplying electricity directly to the KESC, investors' optimism has reached new. The said connection has the potential to raise the load factor of the plant beyond 65%, it is unlikely to have any impact on the dividend payout by the company. While the downside remains protected, the upside for shareholders is limited to 65% capacity load factor. The company is entitled to a bonus from WAPDA for every unit produced above 65% load factor. This bonus amount is available for distribution as dividend. Analysts say, "Even if the plant operates at 100% load factor, the company would receive a little more than half a billion rupee, too meager an amount."

MOVEMENT AT A GLANCE

SCRIP

HIGH
(Rs.)

LOW
(Rs.)

CLOSING 
PRICE

TURNOVER
 (SHARE)

P.T.C.L.A.

31.55

31.25

31.35

134,203,500

Hub Power

39.45

39.20

39.20

110,962,500

P.S.O. XD

259.90

248.60

259.90

103,101,000

M.C.B.

42.10

41.00

41.50

56,180,500

Engro Chemical

90.25

89.30

90.25

41,656,600

National Bank

32.45

31.15

32.25

33,206,500

Fauji Fertilizer

92.85

89.75

89.75

16,631,000

Union Bank

19.20

15.90

19.20

6,276,000

Askari Bank

38.80

37.30

37.30

3,411,000

Shell Pakistan

433.35

427.50

431.75

846,200