Updated November  22, 2003



The KSE-100 Index recorded a 3% rise on a WOW basis. As usual, the week started off on a positive note, with volumes on the higher than average side because of institutional presence. The rise was also influenced by the cement demand report that denoted 19% jump in the last four months and reports of OGDCL's Initial Public Offering being oversubscribed. Tuesday however, saw the index fall for the only time this week on the back of low volumes. Continued cement sector interest however, served to offset the decline to a certain extent.




On Wednesday, volumes hit a fifteen-month low as institutions seemed to be non-existent. During the day however, some interest began to develop in PSO. Thursday saw volumes jump up again and institutional activity was visible. Furthermore, PIAC attracted attention on the back of news regarding the carriers decisions to acquire 6 new planes on a dry lease basis and to operate new routes in the Central Asian region. Friday saw the trend continuing upwards as institutional transactions were supported by aggressive retail activity.


With a two day working week next week, it is likely that activity will remain limited as investors wait for the end of the holiday period to get actively involved. It is expected that whilst there will be some limited institutional activity, retail investors will stay on the sidelines.


The major developments this week were:

•The SBP declared a loss of PkR11.8bn for the year loss on account of forex purchases, resulting in profits declining to PkR243mn from PkR25bn last year.

•In a meeting held between the Minister for Water and Power, government officials and officials of KESC and WAPDA, it was informed that tenders for the PkR3.0bn Hubco-KESC 500KV transmission link project will be opened on Dec. 16, 2003. The Minister was also informed that bids for the supply of equipment for the proposed project would be invited by March 2004.

•Auto sector sales dropped off during the July-September period when compared to the April-June period.

•Volumes as well as prices came down in the cotton market in the last few trading sessions as participants await the arrival of latest figures of phutti into the ginneries. These numbers, expected early this week will help determine whether the Government's production target of 10mn bales is achievable.

•Workers' remittances declined by 5.28% during the first four months of the current FY. Total remittances recorded during Jul-Oct were US$1,235mn as against last year's collection of US$1,304mn. The major declines came from the US (16% YoY to US$375.5mn) and the UAE (44% YoY to US$194mn).

•The IPO of OGDCL was oversubscribed with applications of PkR20bn being reported against an offer of PkR3.4bn. The CCoP in its meeting held yesterday approved the exercise of the green shoe option of another 2.5% shares of OGDCL. As a result, total applications amounting to PkR6.88bn will be accepted. The Minister for Privatization has reiterated his previous stance that preference would be given to small investors who have submitted applications for 1,000 shares.

•The EU has decided to impose anti-dumping duty on Pakistani bed linen. This move is in sharp contrast to earlier reports that the EU had decided to accept the voluntary price mechanism proposed by local exporters. The Commerce Minister stated that Pakistan will object to the imposition of any duty at the WTO appellate tribunal.




Sui Northern Gas Pipelines Limited announced its FY03 results yesterday, posting after tax profits of PkR2,014mn (EPS: PkR4.03), 8% YoY higher. The company also announced a cash dividend of PkR2.2/share for the year. The increased profitability of the company is mainly on the back of the increasing asset base of the company, as the company's returns are fixed at 17.5% of its asset base. The government has also adjusted its Gas Development Surcharge from the company, which has declined by 22% YoY to PkR3,189mn in FY03. The other income of the company has increased by almost 90% which in our opinion is due to some one-off gains recorded by the company. With the company relying mainly on debt for financing its expansions, the financial charges have also increased by 10%. We maintain our Neutral recommendation on SNGPL.

In line with our expectations SNGPL announced its FY03 results yesterday, posting after tax profits of PkR2,014mn (EPS: PkR4.03) for FY03. The company's bottomline has grown by almost 8% YoY which is in line with our expectations. The company also announced a cash dividend of PkR2.2/share, which is also in line with our expectations.


Below is the analysis of some of the key accounts of the results:

Sales: Sales has exhibited a growth of 12% YoY which is on the back of increased volumes and a slight increase in gas tariffs during FY03. Gas tariffs were increased in the beginning of FY03 as part of the gas sector reform program. In addition, the government has also adjusted its Gas Development Surcharge to ensure a 17.5% return to the gas utility. GDS has declined to PkR3,189mn in FY03, a decline of 22% YoY. Operating Cost: Operating costs have increased by 9% YoY which is primarily on the back of high wellhead cost of gas. With the commissioning of new gas fields, the average cost of gas has increased, as the new fields are relatively expensive. Also, with the production profile of the Sui gas field declining (one of the cheapest source of gas), the reliance of the gas utilities on the new gas fields is increasing.

Other Income: Despite a general in interest rates, the company has been able to post a 90% YoY improvement in its other income. The company had recorded "Other Income" to the tune of PkR180mn for the first 9-months of the current FY. Therefore, an income of PkR209mn, which is even higher than the cumulative figure under this account for the period Jul-Mar 2003, leads us to believe that the company has booked some one-off gains in this account.

Financial Charges: Financial charges of the company have increased by 10% YoY, slightly lower than our expectations. While the average borrowing cost of the company has declined, the increasing capex of the company is mainly being financed through debt., which in our opinion has increased the company's financial charges.






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