THE KASB REVIEW

STOCK MARKET AT A GLANCE

 

 

By SHABBIR H. KAZMI
Updated Apr 24, 2004

 

The market finally witnessed the much-expected correction and the index lost 3.24 percent WoW, closing at 5,406.98 against 5,589.24 last Friday. The week started on a positive note with the index closing at a new high of 5,620.66 on the back of news of a plan to float OGDCL GDRs. Tuesday, on the other hand, proved to be the first session after a five-day run when the index closed lower than the previous day's close. The downward trend continued on Wednesday, with the

 

 

 

 

index losing another 158.72 points by the end of the day. This slide, which translates into a 2.84 percent decline, was triggered by an announcement that one of the generators of Hubco had tripped. Thursday's session, however, managed to recoup Wednesday's losses, with a boost in the price of OGDCL shares playing a significant role in aiding the recovery. Trading on the last day of the week continued to reflect the volatile pattern witnessed over the previous four sessions, with the index losing 168.83 points and finally settling at 5,406.98.

OUTLOOK FOR THE FUTURE

Various important companies are set to announce their quarterly results during the coming week. The continuation of the reporting season implies that news from the corporate sector will once again be the dominating factor in determining the direction of the market. Given that the market is generally expecting good results, barring any adverse surprises, these announcements should help investors in regaining their confidence. Furthermore, while no one can predict whether or not the volatile trading pattern witnessed during the current week will carry over to the coming week, it appears likely that once the correction process settles down, investors will feel more comfortable in actively participating in the market once again.

FUNDAMENTAL CHANGES

The major developments this week were:

•The State Bank mopped up PkR18.5bn from the market on Friday through a two-week repo of treasury bills at 1.14 percent.
•A report issued by the World Bank, titled 'Textile and Clothing Policy: Implications for Pakistan of Abolishing Textile and Clothing Export Quotas', has indicated that while Pakistan is likely to experience an increase in textile output and exports in the post-quota period, clothing exports could suffer from a significant fall.
•Honda Atlas Cars launched a new Civic for 2004. As per the company, the new Civic has new lights, a new front bumper and a new bonnet. Furthermore, the EXi variant will now come equipped with disc brakes on all four wheels as opposed to just the front wheels that the current model is equipped with. These changes have resulted in a rise of approximately PkR25,000 in the price of the EXi variants.
•Provinces stuck to their demand for a 50% share of the distributable revenues against the federal government's increased offer of 47% during an informal NFC meeting held on Friday. The federal government's increased offer boosts the provinces' share to PkR255bn versus the PkR250bn that was previously offered.
•The State Bank of Pakistan (SBP) announced that it will be selling PkR40bn worth of Pakistan Investment Bonds (PIBs) in April and May.
•Reportedly, the Privatization Commission will be announcing the offer price for the divestment of 5% government held shares of Pakistan International Airlines in the first week of May-04.
•Pakistan received US$586.8mn net foreign direct investment during the first nine months of the current FY, which is about 11.7% lower YoY.
•Callmates Telips, a payphone/prepaid calling cards company came up with the offering document in newspapers during the week. The company is planning to issue about 15mn shares to the general public.
•PPTA posted after tax profits of PkR221mn (EPS: PkR0.15) for 1Q04. A reduction in fixed charges of the company contributed towards substantial improvement in the company's financials.
•The IMC reported a 22% YoY drop in profits from PkR384mn (EPS:PkR3.8) to PkR300mn (EPS:PkR4.9) for 3QFY04, even though revenues jumped 40% YoY.
•The Hub Power Company Ltd. (Hubco) posted net profits of PkR1,529mn (EPS: PkR1.32) for 3Q04. The net profits showed improvement over the EPS of PkR1.13/share reported in 2Q04 as the company's tariff is higher in the second half of the fiscal year.
•Lucky Cement announced profits of PkR166.94mn for 3QFY04, 10% up QoQ.
•Maple Leaf Cement reported profits of PkR128mn for 3QFY04.

ICI PAKISTAN LIMITED - 1Q04 RESULTS REVIEW

 

 

ICI Pakistan posted a 25% YoY improvement in its bottom line, with after tax profits at PkR216mn (EPS: PkR1.55). The improvement in the profitability of the company was primarily led through a 35% reduction in financial charges, as a result of the company's loan refinancing exercise. A 15% reduction in the top line is mainly attributable to a decline in furnace oil business, which has suffered due to a reduction in the overall demand for FO in the country. We expect ICI's PSF and Soda Ash businesses to continue to struggle in the coming year, while the Paints division is likely to continue its strong performance. We maintain our Neutral stance on ICI with our 12-month target price of PkR78/share.

ICI POSTS 25% YOY IMPROVEMENT IN BOTTOMLINE

ICI Pakistan announced its results for 1Q04 yesterday, posting after tax profits of PkR216mn (EPS; PkR1.55), a 25% improvement over 1Q03. The improvement has mainly come as a result of the declining interest charges of the company, which came about as a result of the refinancing of the majority of the company's loans.

INVESTOR RECOMMENDATION

The improvement in the bottom line of the company has been primarily led by a substantial reduction in financial charges. While these cost savings are likely to continue, we believe that ICI's PSF and Soda Ash businesses will continue to struggle in FY04. The paints business on the other hand is likely to continue its strong performance. We recommend a Neutral stance on ICI Pakistan with our 12-month target price of PkR78/share.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

25.93

25.32

-2.35%

Avg. Dly T/O (mn. shares)

879.72

718.64

-18.31%

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

753.63

617.10

-18.12%

No. of Trading Sessions

5

5

 

KSE 100 Index

5582.30

5406.98

-3.14%

KSE ALL Share Index

3632.84

3523.22

-3.02%