led institutions to add the stock to their
portfolios. The stock was further boosted by news of the discovery of
oil and gas reserves by the company in Lala Jamali. The resulting
improvement in market sentiment also helped push up index related
stocks, which led to the index rising by 0.95 percent on Wednesday.
Removal of democracy related sanctions by the United States further
fueled investors' positive sentiments and pushed the index up by
another 1.33 percent on Thursday. PTCL, the largest stock in the index
was also a major gainer. Trading on the last day of the week continued
on this positive trend and raised the index by yet another 0.12
percent. Overall, the market posted stronger gains during the current
week than it has for a number of weeks. Furthermore, volumes also
spiked during the current week and touched levels not seen since
OUTLOOK FOR THE FUTURE
As mentioned above, investors are of the opinion
that OGDCL will be added to the KSE-100 index from the first week of
April. Consequently, OGDCL could give the market an upward boost in
terms of investor sentiment again next week as institutions continue
to add the stock to their portfolio. On the negative side, the market
does not appear to have taken the developments in Wana into account
yet. If the situation in the tribal area drags longer than expected,
or worsens further, the market could react negatively to the
situation. Moreover, while we stated last week that the crossing of
the index over the 5000 mark would boost investor sentiment, the same
argument can apply in the opposite direction. Some investors and
analysts seem to be on the jittery side because of the fact that the
index is above the 5000 mark. Any unexpected negative news could
result in bears becoming the dominant force in the market. Thus we
expect a mixed outlook for next week.
The major developments this week were:
•The Chairman of Board of Investment (BoI)
announced that BoI has received 33 Expression of Interests (EoIs) for
setting up 5,500MW power plants in Pakistan. The EoIs were called by
Pakistan Power and Infrastructure Board (PPIB) a few months ago which
generated a good response from the corporate sector. Among the majors,
Engro Chemical and Hub Power also submitted EoIs for setting up power
•Reportedly Bank Al-Falah is coming up with a
PkR1.2bn IPO and has applied for the local listing.
•PTCL placed advertisements for various
positions, most notably Chief Information Officer and Corporate
Business Analyst positions, indicating the proactive attitude of the
•Urea prices were raised by PkR5 per bag.
•Commerce Minister Humayun Akhtar is reportedly
having trouble in coming up with a quick solution to the dispute
between APTMA members due to his personal ties with the parties
•United States withdrew democracy related
sanctions on Pakistan.
•The Planning Commision criticized PIA's purchase
•A newspaper report indicated that the cellular
subscriber base in Pakistan has crossed 4mn.
•The Federal Cabinet approved an increase in the
support price of seed cotton (phutti) from PkR850 per 40 kg to PkR925.
•PSO sought offers to import 110,000 tons of
furnace oil during April-May, indicating that restriction on the
import of furnace oil has been lifted temporarily.
•Pak Suzuki declared a profit of PkR1.57bn for
FY03, translating into EPS of PkR32/share, along with a dividend of
PkR3 per share.
•Reportedly General Musharraf presided a meeting
with his technology advisors on the corporate split of PTCL. While
these advisors have advocated a split, the President has passed the
decision on to the new management of PTCL. As per the Presidential
decision, the new management will take an in-depth view of the pros
and cons of the proposal within three months and will make their
recommendations to the President.
SUZUKI-STRONG PROFITS, SHOCKING DIVIDENDS!!
The Pak Suzuki Motor Company Limited as expected
reported strong revenue and profit growth for FY03. The company
reported an 85% jump in profits to PkR1.57bn on the back of a 68% jump
in revenues to PkR18.48bn for FY03. However, the company chose to pay
out a ridiculously low cash dividend of PkR3/share against earnings of
PkR32/share. With the stock trading at a 47% discount to the sector
PER, at a 71% discount to the market PER and at a 17% discount to our
fair value, we issue a BUY call on the stock.
After an extended board meeting, Pak Suzuki finally
released its FY03 results on Thursday March 25, 2004. The company
declared profits of PkR1.57bn, which were marginally below our
expectations of PkR1.61bn, on the back of PkR18.48bn worth of sales.
The company also declared a final cash dividend of 30%. Strong Revenue
Pak Suzuki's revenues grew by 68% YoY to PkR18.48bn
on the back of the 68% YoY jump in unit sales to 49,465units during
the year ended December 31, 2003. As is evident, revenues per unit
remained virtually constant YoY as the company's sales mix remained
nearly the same.
As is evident from the table, the company's cost of
sales rose slower than its sales revenues, possibly due to increased
production efficiency and increased deletion levels. At the same time,
operating expenses shot up 20% YoY on the back of increased
advertising expenses as the company sought to improve the sales of the
Baleno during the year.
Dividends proved to be the biggest surprise. Given
the company's payout last year, we were expecting the company to
declare PkR6/share as cash dividends for FY03. However, the company
stuck to the same payout that it made last year, even though profits
nearly doubled. The declared payout of PkR3/share resulted in a
ridiculously low payout ratio of just over 9%. What makes this payout
seem even more ludicrous is that at the end of the 3QFY03, the company
reported cash holdings of PkR7.6bn on its balance sheet.
Mkt. Cap (US $ bn)
Avg. Dly T/O (mn. shares)
Avg. Dly T/O (US$ mn.)
No. of Trading Sessions
KSE 100 Index
KSE ALL Share Index