signaling the market to develop similar expectations
from FFC. However the selling pressure generated from higher COT rates
forced the market to close below the 5500 mark.
OUTLOOK FOR THE FUTURE
In the coming week, the major quarterly results
including that of OGDCL, PTCL, FFC, DGKC are expected to be announced,
which in our opinion is likely to be the key driving factor for the
market. We expect the energy sector stocks to report healthy profits on
the back of high oil prices. In addition, the fertilizer and cement
companies are also expected to post decent results on the back of
increased fertilizer and cement sales during the last quarter. However
the trading activity will remain low owing to the Ramadan factor. We
advise investors to remain overweight on the energy related stocks.
Meanwhile we suggest investors to stay away from the cement sector owing
to the riskiness of investment in the sector as against the market.
The major developments this week were:
•PTCL's management has submitted its report to the
President regarding its recommendations over the basic question about
whether the company should be sold in its existing form or whether it
should be split up before divestment.
•As per the State Bank of Pakistan, remittances
received rose 10% YoY to US$981.5mn from the US$890.3mn reported during
the same period last year.
•Car sales during July-October shot up 37% YoY to
28,777units from the 20,944 units recorded last year.
•Government losses due to subsidizing oil prices
have increased to PkR20bn.
•The US Dollar crossed the PkR60 mark on Monday in
•The Privatization Commission (PC) has requested
the federal government to waive a surcharge of PkR345mn owed by KESC to
Sui Southern Gas Company.
•Pakistan Oilfields Limited announced its 1QFY05
results yesterday posting after tax profits of PkR660mn (EPS: PkR5.02).
•As per data released by the NFDC, DAP Offtake
during the month of September 2004 registered a 107% YoY jump from 74k
tones to 148k tonnes while Urea offtake reported a 44% rise during the
•Unilever Pakistan reported a 153% YoY jump in
profits to PkR1,021mn on the back of a 14% YoY decline in revenues to
PkR4,768mn for 3QFY04.
•As per the Economic Advisor to the Ministry of
Finance, Pakistan yesterday appointed HSBC and Citibank N.A. as lead
managers for the issue of Pakistan's Islamic Bonds (Sukuk).
•As per figures released by the SBP, foreign
investment in Pakistan shot up 127% YoY in 1QFY05 to US$201.8mn,
compared to the US$88.1mn recorded during the same period last year.
•Fauji Cement posted after tax profits of
PkR136.243mn (EPS: 0.37) for the quarter as opposed to PkR57.29mn (EPS:
0.15) during the same period last year.
•Hubco announced net profits of PkR1,370mn (EPS:
PKR1.18) for 1QFY05.
•According to data released by the State Bank,
private sector credit offtake during July-October, shot up by 103% YoY
to PkR64.5bn from the PkR31.8bn recorded during the same period last
•The Rupee hit three year lows of PkR61.7 against
the US Dollar on Thursday before the State Bank intervened and sold US
Dollars thereby allowing the Rupee to recover to close at PkR60.4 after
PAK OILFIELDS LTD — 1QFY05 RESULTS REVIEW
Pakistan Oilfields Limited announced its 1QFY05
results, posting after tax profits of PkR660mn (EPS: PkR5.02). As per
our expectations, net sales revenue of the company recorded handsome
growth of 11%. However this growth could not filter down to the bottom
line owing to high exploration costs. Exploration costs rose by almost
50% Q0Q and almost 12 times when compared to the same period last year.
The high exploration costs are mainly attributable to the aggressive
exploration activity being carried out by the company since last couple
of years. And the exploration efforts have already paid off as oil and
gas discovery was made in Tal block last year. We maintain our Buy
recommendation on POL.
POL'S 1QFY05 RESULTS
Pakistan Oilfields Limited announced its 1QFY05
results earlier this week. The company posted after tax profits of
PkR660mn (EPS; PkR5.02) for the period, which represents an 8% decline
when compared to the profits for the same period last year. However, the
results are not very comparable due to the fact that the company's
exploration costs were exceptionally low during 1Q04.
REVENUES RISING WITH INCREASING OIL PRICES
As expected, the rising oil prices had an impact on
the top line growth of the company. Net sales revenue of the company was
recorded at PkR1810mn, which represents a 11% growth over the same
period last year.
We were expecting this handsome growth in topline
owing to rising crude oil prices. Given the pricing mechanism of oil and
gas in the upstream sector, companies with higher percentage of revenues
coming from crude oil is likely to benefit more quickly from the rising
trend in crude oil prices.
SURGE IN EXPLORATION COSTS
While the topline growth was as per our expectations,
it could not flow down to the bottom line owing to high exploration
costs. The company wrote off exploration costs of PkR270mn during 1Q05,
which is almost 12 times higher than the cost recorded in the same
period last year. The higher costs are mainly attributable to the
aggressive exploration activity of the company, which has picked up pace
over the last one year.
WE MAINTAIN OUR BUY RECOMMENDATION ON POL
At current prices, POL is trading at 9.5x FY05E
earnings and an EV/EBITDA of 4.9x. We also expect POL's dividend payout
pattern to normalize this year and expect the company to announce
dividends along with its semi-annual and full year's result. At current
prices, POL's dividend yield stands at almost 7%. We maintain our Buy
recommendation on POL with a price objective of PkR261/share.
THIS WEEK'S TOP STORIES
MAPLE LEAF 1QFY05 RESULTS — PREVIEW
Maple Leaf Cement is expected to announce its 1QFY05
results today. Maple Leaf is likely to report PAT of PkR189mn (EPS:
PkR1.05) for 1QFY05 as compared to PkR202mn (EPS: 1.12) reported during
the same period last year. While Maple is likely to report a 6% decline
in its bottom line owing to the change in the effective taxation rate
for the company, we expect a 41% YoY improvement in EBT to PkR291mn
during the quarter. The company is likely to report a 19% rise in sales
revenue, which can be attributed to 16% growth from the volumetric side.
We maintain our concerns over aggressive capacity expansion plans of the
company. We also maintain our Buy recommendation on Maple Leaf with a
target value of PkR42.64 per share. 15% upside from current price.
UNILEVER PAKISTAN — 3QY04 RESULTS PREVIEW
Unilever Pakistan Limited is expected to announce its
3QFY04 results today, wherein we expect the company to declare profits
of PkR1,044mn on the back of sales of PkR4,458mn. While margins are
expected to remain depressed, we expect the company to report a PkR864mn
as the gain on sale from the sale of Dalda. While an extraordinary
dividend is possible, we expect the dividend to be paid at the end of
the year. With the stock trading at a 5% discount to our DCF fair value
of PkR1624/share, we issue a HOLD on Unilever Pakistan.
ENGRO CHEMICAL 3QCY04 RESULTS — PREVIEW
Engro Chemical is expected to announce its 3QCY04
results today. Engro is likely to match its last year's 3Q earnings of
PkR2.37 per share during the period under review. We rule out any
possibility of a cash dividend. A 16% decline in Engro's bottom line can
be mainly attributed to the gas subsidy shock, while there is a
likelihood of a positive surprise from a significant jump in DAP sales.
We maintain our liking for the Fertilizer sector and recommend a Hold on
Engro with a target value of PkR106.03 per share.
MAPLE LEAF 1QFY05 RESULTS — REVIEW
Maple Leaf Cement announced its 1QFY05 results on
Monday. The company posted after tax profits of PkR147mn (EPS: PkR0.82)
for 1QFY05 as compared to PkR202mn (EPS: 1.12) reported during the same
period last year. The company has also announced a 50% rights issue and
30% Preference shares issue.
The 27% decline in Maple's bottom line may be
attributed to higher cost of sales attached with the additional units
produced through the wet process. The numbers reported by the company
are deflated by PkR0.44/share on account of deferred tax during the
period. We are in the process of revising our target price for Maple
Leaf. Meanwhile we withdraw our existing Buy recommendation for the
company. We will be back with a detailed comment on Maple shortly.
ENGRO CHEMICAL 3QCY04 RESULTS — REVIEW
Engro Chemical announced its 3QCY04 results
yesterday. The company posted after tax profits of PkR532mn (EPS: 3.42)
as opposed to PkR362mn (EPS: 2.37) during the same period last year. The
company surprised everyone with a 45% jump in profits and PkR2.00/share
interim dividend. The results came in above our as well the market
expecta tions owing to an exceptional growth of 58% in Sales revenue
which minimized the impact of the subsidy shock. We maintain our liking
for the Fertilizer sector and recommend a Hold on Engro with a target
value of PkR106.03 per share.
CHERAT CEMENT 1QFY05 RESULTS — PREVIEW
Cherat Cement is due to announce its results for
1QFY05 on October 25th. We expect Cherat to post after tax profits of
PkR121mn (Diluted EPS: PkR1.82) for the period as opposed to PkR104mn
(EPS: 1.56) reported during the same period last year. The growth in
Cherat's earnings is likely to accrue from: (I) a 10% increase in sales
volume; (II) a 20% reduction in financial charges, and (III) healthy
price retentions for exports. Owing to a 20% discount to our revised DCF
based target price of PkR81.81/share.
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