THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated January 24, 2004

 

The current week witnessed the initiation of formal trading of OGDC's shares on the Karachi Stock Exchange. This helped the market capitalization of KSE in crossing the $20bn mark, which is widely regarded as a key minimum international benchmark. Overall, the market continued its slow upward journey and settled at 4,764.12 on Friday. This represents a 1.71% gain over the previous week's close of 4,684.04. Continued lack of significant news from the corporate 

 

 

 

 

and political sectors kept the movement of the market between a narrow band throughout the week, with the greatest variation being a 1 percent gain realized on Thursday. This led to the closing of the index at a new all time high of 4,769.31. Friday's session, however, gave back some of these gains and the index ended the week at a slightly lower level.

OUTLOOK FOR THE FUTURE

After a long drought of news from the corporate sector, next week will start witnessing increased activity from this front. Various companies are expected to report their quarterly earnings during the coming days.

However, we do not expect this increase in activity to translate into an increase in the volatility of the index, since the market has already taken into account the expectations for these results. Thus, barring any surprises, the index is likely to remain range bound.

FUNDAMENTAL CHANGES

The major developments this week were:

•The President addressed a joint session of parliament on Saturday.

•Remittances jumped by a record 52% during Dec-03 to $385.7mn from the $253.1mn received during Nov-03. On a YoY basis however, the jump was only 6% higher from the $363mn received last year.

•The SBP carried out the first auction of 15 and 20-year bonds during the week. These bonds will serve as a benchmark for mortgage and other long-term lending.

•The PCGA revealed that cotton production was reported at 8.87mn bales as on January 15 as compared to 9.19mn bales during the corresponding period last year.

•The State Bank released the monetary policy statement for January-June 2004.

•In a bid to control non-performing loans, most nationalized and private banks decided to discontinue the extension of loans without collateral to small and medium enterprises in Balochistan.

•The Privatization Commission held a road show in Lahore for SSGC's upcoming public offering. The dates for the public subscription have finally been decided to be Feb. 9-11, where the government will be divesting up to 10% of its stake in the gas utility.

•Hubco announced that it would hold a meeting of the board of directors on the 28th of January to consider half-yearly accounts for FY2004.

•Reports indicated that the WorldCALL Broadband issue was oversubscribed six times with total applications received worth PkR1.75bn.

•SBP auctioned 3 and 12-month T-bills worth PkR60bn on Wednesday.

•Reports indicated that the government is likely to issue bonds against Allied Bank's non-performing loans and advance income tax payment within a short period to facilitate the privatization process of the bank.

•Senior State Bank officials and heads of all banks took a decision on Wednesday to use the Karachi inter-bank offered rate (KIBOR) as a valid reference for corporate lending by banks from February 1.

•Reports revealed that Dewan Motors, not Dewan Farooque Motors, will be selling BMWs in Pakistan. Dewan Motors, part of the Dewan Mushtaq Group, is a private limited company.

•Al-Abbas Group, which had submitted a bid of PkR9.95/share for Thatta Cement, announced that it will be buying out the government stake in the cement company.

•The SECP issued new prudential regulations for non-banking finance companies under which, up to 80 percent of credit could be extended against equity of 20 per cent.

•The Pakistan Telecom Regulatory Authority received 33 expressions of interests for 2 cellular licenses.

•Foreign Direct Investment fell 49% YoY to US$277.1mn during 1HFY04.

•The State Bank carried out a repo of one-week and four-week T-bills on Thursday and managed to collect PkR37.5bn through the process.

•Reports indicated that the government is considering the offer from Reliance Group to import diesel from India.

HONDA ATLAS CARS LIMITED — 3RD QUARTER REVIEW

Honda Atlas seems to be having quite a volatile year. On the one hand, sales of the newly launched City, after a slow start, seem to be picking up strongly. We maintain our HOLD call on the stock, which is trading at a slight discount to our DCF based fair value of PkR83.

 

 

HIGHER YOY UNIT SALES

During 3QFY04, sales of the Civic on a QoQ basis continued declining slowly to 1335units from 1350units recorded in the quarter before.

RECOVERING MARGINS

During 3QFY04 the company also recorded an improvement in its margins. The continued strength of the rupee ensured that the cost of imported materials did not rise, as is apparent from the improving gross margin.

EXPECTATIONS

The Pakistani public has taken longer than expected to get used to the radical new design of the 2003 City. As is apparent however, the model is quickly gaining acceptance and may be expected to continue selling strongly. At the same time, the Civic is losing market share.

INVESTMENT ADVICE

Honda is the only car company in Pakistan to operate in a single segment. This brings with it some risk, since the 1300cc+ segment is highly competitive and is dominated by the high-flying Corolla. The stock is currently trading at a slight discount to our fair value of PkR83/share, therefore we issue a HOLD on the stock.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

17.48

21.73

24.31%

Avg. Dly T/O (mn. shares)

270.18

418.31

54.83%

Avg. Dly T/O (US$ mn.)

212.60

358.02

68.40%

No. of Trading Sessions

5

5

 

KSE 100 Index

4684.12

4762.37

1.67%

KSE ALL Share Index

2982.60

3023.50

1.37%

 

 

Source: KSE, MSCI, KASB