Updated February  29, 2004


The week started off on a negative note with the market dropping 113 points, or 2.33 percent, by the end of Monday's trading session. The sell-off was triggered primarily by the announcement of below market expectation results by Pakistan Oil Fields. It is interesting to note that Pakistan Oil Fields instigated the last market correction as well and that there were fears after Monday's session that a repeat performance was about to occur. However, the doubts proved to be unfounded with the market recovering some of the losses on Tuesday on the back of a rumor regarding an agreement between Lucky Cement and the cement cartel.





The remaining week continued the positive trend, primarily fueled by the announcement of strong results by companies such as PTCL, which met or beat market expectations. Overall, the index closed at 4,840.37, a 0.58 percent decline over previous week's close of 4,869.93.


While next week will witness fewer trading sessions than normal due to the Ashura holidays, these sessions have the potential to deliver a strong punch. Hubco is expected to announce it's interim dividend on the fourth of March. While analysts were previously expecting a dividend in the range of PkR2-2.1 per share, our calculations show that it is likely to be significantly lower than this number. This could have serious repercussions for Hubco's price. Given the position of Hubco as a key blue chip, any sizeable fall in the stock price can in turn have an adverse impact on the whole market.

The KSE-100 index will also be recomposed next week. The re-composition will be in line with the policy of the KSE where the index is recomposed quarterly. OGDCL is likely to be included in the index during this process. Although the inclusion of any new company in the index requires that the company have a 6-month trading history at the KSE, it is likely that OGDCL will be treated as a special case since it will provide a significant boost to the KSE-100's market capitalization. Although this is an important development, it will not have an immediate impact on the level of the index.


The major developments this week were:

•Goldman Sachs and JP Morgan, financial advisors on the strategic management sale of PTCL, opposed the government's plans to restructure the state-run telco.

•The World Bank offered Pakistan $10bn in soft loans over the next few years for the power and water sectors.

•For the first seven months of the current FY, Foreign Direct Investment fell 43% YoY to $339.5mn from the $596.4mn received last year.

•The government received 20 proposals from seven international banks for the swapping of the fixed for floating Eurobond interest rates. Citibank, ABN Amro and Standard Chartered bank are reportedly the leaders for getting the contract.

•Hubco announced that its board of directors are scheduled to meet on March 4, 2004 to approve and announce an interim cash dividend for FY04.

•According to data released by the State Bank, banks have started reducing their investments in government securities and are redirecting their money towards credit disbursement.

•Sui Southern gas Company Limited announced its 1H04 results, posting after tax profits of PkR609mn for the period, 0.5% higher YoY.

•USA proposed a financial package worth US$701mn for Pakistan for the next fiscal year. The package, the largest ever offered to Pakistan, is to be presented to Congress for approval and is US$101mn greater than the amount pledged by President Bush to President Musharraf at Camp David.

•The Bank of Punjab declared earnings of PkR6.86 per share, a 132 percent gain over the corresponding figure for last year.

•SBP announced a plan to launch medium term Islamic bonds in the local market.

•The Indian oil refining and marketing giant, Indian Oil Corporation indicated that it is looking at the Pakistani market to export petroleum products. After Reliance, Indian Oil Corporation (IOC) is the second company that has expressed interest in exporting petroleum products to Pakistan.

•SNGPL posted after tax profits of PkR1,208mn (EPS: PkR2.42), a 26% growth over the same period last year.

•Pakistan PTA announced a recurring after tax loss of PkR528mn for FY02, showing massive improvement over last year's net loss of PkR2,265mn.

•Lucky Cement earned PkR275mn profits during 1HFY04, about 90% higher YoY.

•Pakistani businessmen expressed interest in investment from the Reliance group of India to set up a naphtha cracker in Pakistan.


Pakistan Oilfields Limited announced its 1H04 results earlier this week. The company posted after tax profits of PkR1247mn (EPS: PkR9.49), recording a decline of 6% over the same period last year.



While the company benefited from higher oil prices, a lower production rate resulted in the company posting modest growth of 6% in Net Sales. However, this increase was wiped off by an increase in royalty payments, increased exploration costs and higher amortization. The management of the company decided to skip the interim dividend, which was surprising considering that the company has been paying out interim dividends regularly over the past four years. In the past five years, the company has only skipped one interim dividend in FY1999, which was mainly due to a substantial decline in earnings. We maintain our liking for the stock. BUY!!


Net Revenue: Net sales of the company showed an improvement of 6% over the same period last year. The improvement in sale is however less than expectations. While the company benefited from the rising oil prices, a decline in production resulted in a lower than expected improvement in the top line. Royalties. The company recorded a 50% increase in royalty payments over last year.

Exploration costs: The company recorded a 13% increase in exploration costs, which is mainly on the back of the increased exploratory activities of the company. POL has over the past couple of years started venturing in to exploration in new blocks, and as a result, the exploration cost of the company has increased.


To the surprise of majority of the investors, POL skipped an interim dividend along with 1H04 results. This is the second time in the past five years that the company has not paid out any interim dividend, the first time in 1999. We however believe that the dividend for the full year will be higher compared to last year and will compensate for the interim dividend.






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