STOCK WATCH

 

 

By SHABBIR H. KAZMI
Updated June 05, 2004

 

The Federal Budget for 2004-05 was to be presented on June 5, 2004 but has been delayed due to inconclusive decision regarding NFC. It is expected that now Budget will be presented on June 12, 2004 and opposition will not miss a chance to raise its voice particularly about the law and situation in the country. On June 2, 2004 Minister for Finance and Economic Affairs was a guest on 'News Night' programme on PTV World. He presented convincing argument on the GDP growth and rationalization of duties and taxes. He also hinted towards a broad-based economic revival. However, a number of

 

 

bomb blasts and assassination of a religious leader during the month of May raises serious concerns about the law and order situation in Karachi. It seems that certain elements are bent upon creating law and order situation and also have been successful despite tall claims of and law enforcement agencies.

It has been written in these pages that the KSE-100 index movement has become deceptive after the inclusion of OGDC. The current index levels are not a true reflection of stock price movements. The index doesn't adjust for bonuses and dividends, although individual scrips do. Take the recent example of OGDC; it went ex-dividend on 1st June for its 17.5% cash payout. Although, OGDC adjusted itself and opened Rs 1.60 down (adjusted for withholding tax and badla rate) but the index did not show any decline. OGDC has approximately 22% weightage in the index and theoretically the adjustment should have brought down the index by 35 points (0.64%), which it didn't do. If the index had adjusted for all the bonuses, dividends and right issues its absolute level would definitely be much lower from where it is right now. Therefore investors should pay less attention on the index levels and focus on sectors and individual scrips.

Work seems to be moving at a steady pace on the divestment schedule of the Privatization Commission, though not as fast as most of the investors would have liked to. PIA's public offering seems around the corner, PPL is in the pipeline, and preparations have started to initiate work on Kot Addu Power Company's divestment. The government has received Expressions of Interest from 7 investment managers to act as lead financial advisors to the public offering of KAPCO. These include Arif Habib Securities, BMA Capital, Elixir Securities, First Capital Securities, Global Securities, KASB Securities and Orix Investment Bank.

Pakistan International Airlines paid some attention to its shareholders' pleas. The management came up with a Rs 0.5/share cash dividend for category A shareholders and Rs 0.25/share for category B shareholders. Effectively the dividend is to the tune of 5% as B shares have Rs 5 per share par value. The said dividend announcement is likely to address two areas in the short term: (I) it will avoid the company's defaulter status at the KSE, and (II) it will improve company's image among minority shareholders just before the government divests its PIA shares. However, many analysts strongly believe that the public offer is of hardly any interest for small investors but institutional investors will pick the big lots.

The Federal Budget FY04-05 is not expected to directly impact the earnings of Sui Twins. Both the companies are currently operating under a fixed return formula under which the profitability of the company at EBIT level is linked to their operating assets. The return formula is governed under the loan covenants of the World Bank and Asian Development Bank, which were previously the largest lenders to the two utilities. With the loans from these International Financial Institutions to the gas utilities still outstanding, the current return formula is expected to continue in the near future.

The Budget is likely to focus on reliance on indigenous resources to meet the energy needs of the country, and natural gas tops the list. Increased allocation of gas to industrial and power sector is likely to be pushed and gas utilities are likely to increase the pace on their expansion plans. It is believe that the stock prices of both SSGC and SNGPL have already discounted the expansion plans of the two gas utilities based on the increased demand for gas.

Mutual Fund Industry is growing fast as more funds are being launched. Atlas Asset Management Company announced the launching of two more funds by July 2004. This will take up the size of funds under management of Atlas Asset Management Company to Rs 2 billion. The company is planning to launch a Rs 1 billion stock market open-ended fund and a Rs 500 million closed-ended fund that will primarily be investing in other closed ended funds. While the company might have a strategic vision behind launching of a fund of funds, the idea seems a little different. With the fund of funds, the company will be taking risk on the fund management capabilities of other fund managers, rather than relying on its own expertise.

 

 

Company High  Low Closing Week's Turnover

D.G.K. Cement

62.60

59.50

61.45

186,242,500

Oil & Gas Dev.SPO

69.35

64.75

66.05

146,332,100

M. Leaf Cem.

46.35

43.40

44.00

95,259,500

P.T.C.L.A XD

42.75

41.00

41.75

89,216,500

Lucky Cement

43.75

41.60

42.65

85,735,000

Fauji Fert Bin

20.15

19.30

20.15

77,950,500

National Bank

67.35

62.00

63.60

40,231,500

Sui South Gas

34.80

32.20

32.45

35,046,000

M.C.B.

57.00

52.80

53.00

21,697,600

P.S.O.

265.55

253.50

256.10

7,758,600