•Shaukat Aziz has asked cement manufacturers to
reduce prices. The Finance Minister has also suggested that failure to
do so would result in the government allowing the Trading Corporation of
Pakistan to import cement.
•The Ministry of Commerce has reportedly set an
unofficial export target of US$13.5bn for FY04. The Finance Minister in
his budget speech earlier had announced a target of US$12.1bn for
exports during FY04.
•The Prime Minister has stated that he would like
automakers to reduce their prices and sort out the delivery schedules
over the next six months. However, the Minister for Industries in a
recent convention of one of the domestic automobile manufacturers
clearly ruled out the import of used cars and said that pricing would be
left to market forces.
•PSO unveiled plans to set up a refinery with a
processing capacity of 150,000 bpd crude oil. Whilst the project is
expected to cost US$1.4bn, the company has not defined any specific time
frame for its implementation.
•The Karachi Stock Exchange has reportedly asked
the top three bidders, apart from Pak-Kuwait Investment Co., to raise
their bid price for the four memberships. The exchange authorities have
asked Bank AL Habib, Orix Investment Bank and MI Securities to raise
their bid price to match PKIC's bid of PkR34.75mn for KSE membership.
•Sui Southern Gas Company has reportedly doubled
its gas supply facility over a period of three years. The company's
transmission system capacity has been raised to 1200mmcfd from 600mmcfd
in July 2003. The company is currently in the process of finalizing its
5-year investment program according to which it plans to invest a total
of PkR35bn, mainly to expand its transmission and distribution network.
Furthermore, the company intends to increase its gas supply to power
generation units. It is already supplying around 200-220mmcfd of gas to
KESC, which has enabled the KESC to convert a major chunk of its
generation capacity to gas.
•The government has invited Expressions of Interest
from firms and companies to provide financial advisory for the
privatization of National Refinery Limited (NRL). The government is
aiming to divest its 51% stake in the refinery along with management
control. NRL has a processing capacity of 2.4mn tons per annum for fuel
and 681,000 tons per annum for lube.
•A Saudi-based consortium is reportedly considering
setting up a US$1.4bn coastal refinery in Pakistan. The refinery is
likely to be a joint venture between the Saudi group and State Petroleum
Refining and Petrochemical Corporation (PERAC) or the National Refinery
•The revenue collection figures for FY03 have been
finalized at PkR460.589mn, showing an improvement of 14% YoY.
Collections for the month of Jun-03 stood at PkR68.561mn compared to
PkR60.562mn in Jun-02. The biggest contribution to the growth in revenue
collection has come from sales tax which have increased by 16% YoY to
PkR194.76mn. The strong improvement in revenue collections has raised
the level of optimism of the government which has projected a revenue
collection target of PkR510bn for FY04. However the month of July was
disappointing since the government was only able to collect PkR23bn,
2.6% lower YoY.
• In line with our expectations, the Finance
Ministry has finally put a restriction on the pledging of National
Saving Certificates by banks. According to the notification, banks have
been restricted to pledging PkR1mn worth of NSCs and are required to
seek approval from the Directorate of National Savings in order to
extend financing against NSCs.
•The Economic Coordination Committee has given its
approval to a single wellhead gas pricing formula for both the gas
distribution companies operating in the country. The government had in
the recent past also approved a single tariff for both the gas
utilities. The change in the wellhead pricing formula is the next step
in removing the disparities in the tariffs of both SSGC and SNGPL.
However, the profitability of both the companies remains unaffected as a
result of this change.
•Hubco's Finance Director stated that the company
would be paying out a final dividend of around PkR2.00/share for FY03.
Another interesting part of his statement is that Hubco is planning to
bid to set up a new power plant to meet the power generation
requirements of Karachi. The Private Power Infrastructure Board recently
invited interested parties to bid for the setting up of 900MW of
additional thermal power capacity.
•Against general expectations, POL prices did not
witness any material change from last fortnight. Apart from a 3%
increase in kerosene price, there was no noticeable price change.
FAUJI FERTILIZER — 1HFY03 RESULT ANALYSIS
Our fears about a YoY decline in the profitability of
Fauji Fertilizer Company Limited materialised when FFC reported a 22%
decline in its 1HFY03 profits. The results were in fact far below our
expectations. The subsidy removal in 1HFY03 along with a 132% increase
in financial charges were the causative factors. Moreover, FFC's usual
cushion i.e. Other Income, proved to be quite fragile this time with the
company reporting a 53% YoY decline in this segment. Despite the
numerous shortcomings, management has shown its confidence in the
business by declaring a second interim cash dividend of 22.5%. We are in
the process of revising our earnings expectations for the company and
will soon come up with a detailed report. Meanwhile, we maintain our Buy
recommendation on the stock with a target fair value of PkR99 per share.
FAUJI REPORTED A 22% DECLINE IN ITS PAT
Our fears about a YoY decline in profitability of
Fauji Fertilizer Company Limited materialized when FFC reported a 22%
decline in its 1HFY03 profits. The results were also well below market
expectations of around PkR1350mn for lHFY03. However, the stock did not
get the deserved price beating owing to the currently strong market bull
run. Management also kept its tradition alive by declaring another cash
dividend. This time the payout is PkR2.25 per share, which brings the
total payout for the current FY to PkR5.25 per share.
Mkt. Cap (US $ bn)
Avg. Dly T/O (mn. shares)
Avg. Dly T/O (US$ mn.)
No. of Trading Sessions
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