Updated November  06, 2003


The stock market remained highly volatile during the week. At the beginning of the week the KSE-100 index made significant gains but in the following days most of the gain was lost. The point of concern is that market remained full of surges, though the loss of points on any particular day were not high. The high volatility was attributed to profit-taking.
The appearing of contradictory reports about privatization of PSO has kept its share prices highly volatile in the recent months. Some analysts suggest that the Privatization Commission must refrain from




making further announcements regarding bidding dates till all the pending issues are settled. They also suggest that investors should also keep in mind that privatization of PSO is not an easy task due to vested interest of many.


The Economic Co-ordination Committee recently issued a formal notification waving off almost Rs 8 billion worth of dues payable by the company to the local refineries. This is the formal notification of a decision taken last year when work on privatization of PSO started. More notifications are expected to be issued in near future regarding the settlement of PSO's receivable issues. While the mechanism for settling the issues have been identified, and in some cases implemented, the GoP is expected to issue formal notifications to put the record straight. The issue of notifications is part of the privatization process to provide security to potential bidder against any possible reversal of the government from its commitment.


According to reports the public offer Oil and Gas Development Company (OGDC) has broken all previous records. As reported by the lead manager, the number of applicants was as high as 97,570 amounting to Rs 28.121 billion. The GoP has also decided to exercise green shoe option. The paid-up capital of the OGDC is Rs 43 billion and the public offer was for 2.5% shares (107,523210 shares) at the offer price of Rs 32 per share with a green shoe option of additional 2.5% shares, in case of over subscription. The refund instructions will be notified on December 10, 2003 and shares will be issued/dispatched from January 9, 2004. For the time being OGDC will not among the KSE-100 companies but will be certainly part of the index at the time of its recomposition at the beginning of calendar year 2004.


The year 2003 remained auspicious for the company posting Rs 137 million profit as compared to a profit of Rs 70 million for the last year. Although, there was a decline in sales, reduction in operating expenses, financial and other charges and increase in other income contributed towards improving bottom line. Sales came down from Rs 1,345 million to Rs 1,318 million. However, gross profit declined from Rs 216 million to Rs 202 million. Operating expenses came down from Rs 65 million to Rs 51 million and financial charges declined from Rs 86 million to Rs 56 million. Other income went up from Rs 39 million to Rs 79 million. As result of improvement in profit, the Board of Directors also approved distribution of 25% dividend, the company had distributed 15% dividend last year.




The second quarter and first half-year results of the company for the period ending September 30, 2003 were disappointing. The decrease in profit after tax was due to increase in cost of goods sold. Gross profit for the its half of year 2003 was Rs 382 million as compared to a profit of Rs 537 million for the corresponding half of last year. According to a report from Capital One Equities, the company has a slight disadvantage when compared with the other three assemblers offering a diversified range to suit various income groups. Moreover, the most popular segment in the market is cars with engine capacity of 800-1000cc, being most affordable for majority of people. The 1300cc market has always been dominated by the Honda Civic and Toyota Corolla. However, Corolla has recently gained a larger chunk of the market. The scrip at current price offers dividend yield of less than 5%. Investors must keep in mind the performance dependent on sales and cost of goods sold, sales may remain low and cost of goods sold higher.


The company has posted Rs 298 million profit after tax for the year ending June 30, 2003 as against Rs 112 million loss after tax for the last year. It may seem a pleasant surprise but it was only due to writing back of liabilities worth about Rs 391 million. Otherwise the company had posted Rs 41.5 million operating loss. However, it was less tan half of the loss posted for the year 2002, amounting to Rs 92.5 million. While there was marginal decline in operating expenses, there was substantial increase in financial charges, going up from Rs 87 million to Rs 117 million. The huge accumulated losses, touching Rs 623 million should be a cause of concern for all the stakeholders.