STOCK WATCH

 

 

By SHABBIR H. KAZMI
Updated Dec 11, 2004

 

After a marathon rally of 163 points in the first four days of the week the market finally took a breather on Friday. Peak COT value and over-bought market were the primary triggers of the late week profit-taking. However, on WoW basis the KSE-100 index appreciated by 125 points to close at 5,701 points. The market looks choppy over the next week. Investors need to re-profile their portfolio. They have to 'cherry pick' their stock and can no longer afford to be indiscriminate. The correction has not put a full stop to the bullish momentum and should be viewed as an

 

 

 

 

 

 

 

opportunity to make fresh entry once the market consolidates.

 

 

The Prime Minister, Mr. Shukat Aziz was the chide guest at the Top 25 Companies awards ceremony of Karachi Stock Exchange. During his speech, the PM promised to consider increasing banks' limit of portfolio investments from 20% to 30%. This had a very positive impact on investors' confidence. In the following days the KSE-100 broke one record after another. Now all eyes are set at the index breaching 6,000 level.

Atlas Fund of Funds (AFF) is set to commence its Initial Public Offering (IPO) from 13th December. Total fund size is Rs 500 million of which Rs 200 million is being offered for public subscription. The fund is mandated to invest primarily in other closed-end funds, with indicative portfolio allocation of 80% closed-end funds, 10% open-ended schemes and the remainder in COT and short-term money market instruments. The AFF as a concept allows investors to diversify investment risk and pool-in different investment policies. Given the AFF's investment objective, increased activity is expected and possible narrowing of discounts of the closed-end funds.

PAKISTAN STATE OIL COMPANY

Pakistan State Oil's market share continues to grow. Its market share in overall white oil segment has edged up to 60% from the previous level of 59%. While the recent retail outlet modernization has played a vital role in the re-emergence of PSO as the market leader, it is also feared that some of this growth might have come through price competition. When competing in price, volumetric sales are generally given more importance, which could potentially affect profitability of the company. Another factor having the potential to improve its earnings is growing furnace oil sale due to growing dependence on thermal power generation plants.

PAKISTAN TELECOMMUNICATION

Pakistan Telecommunication Authority has approved a 23%-45% reduction in interconnection rates of PTCL. A key point to note is that interconnect revenues will be incorporated for first time in PTCL's accounts in FY05 and therefore the reduction will not impact YoY earnings momentum. Reduction in interconnection charges was expected and this should allow the private sector telecom operators to provide competitive rates to their subscriber base. Despite emerging challenges, PTCL remains one of the key picks of brokers. The company is handling deregulation well and proactively, expansion program is moving ahead as per plans and efficiency gains from operational restructuring have started yielding results.

SEPCOL

Southern Electric Power Company recently reached an agreement with WAPDA whereby the Annual Dependable Capacity (ADC) of the plant has been reduced to 95.805MW for the current year. The ADC has also been reduced for FY2004, as a result SEPCOL is liable to pay a total of Rs 32 million as Liquidated Damages to WAPDA. This is likely to directly affect the equity return component of the company, and thus, dividend payouts. According to the Power Purchase Agreement between IPPs and WAPDA, IPPs are required to carry out dependable capacity test on an annual basis to ensure the dependable capacity of the power plant. Capacity Purchase Price (CPP) payments are guaranteed at 60% of the Dependable Capacity of the plant, and thus any reduction in dependable capacity would negatively affect the CPP. Since equity return component of IPPs is built in to the CPP, a reduction in CPP would result in a reduction in the return accruing to shareholders. According to a report from Elixir Securities, the company has two option to adjust for the reduction in the dependable capacity (i) it can pass on the impact of lost revenue by reducing the fees paid to Operation and Maintenance Contractor, or (ii) adjust it through reduction in the equity return component. It is believed that the reduction has been absorbed against the equity return, and thus it is likely to affect the dividend payment capacity of the company in the immediate term. According to the Settlement Agreement SEPCOL is liable to pay a total of Rs 32 million to WAPDA as Liquidiated Damages. Out of this amount, Rs 26 million relates to the first three operational years of the company, whereas Rs 6 million is to be paid for the fourth and fifth agreement year.

 

 

Company High Low Closing

 Week's Turnover

Sui North Gas

59.40

56.55

59.40

216,269,000

Nishat Mills

66.30

54.40

66.30

210,450,300

National Bank

74.75

73.65

74.55

128,698,100

Fauji Fert BinSPOT

25.75

24.75

25 35

124,042.500

D.G.K. Cement

53.25

51.95

51.95

118,546,800

Lucky CementXB

39.10

38.05

38.05

52,988,500

Sui South GasXD

26.15

25.45

26.00

37,219,000

Pak Oilfields

211.90

208.90

208.90

31,400,000

Fauji Fert.SPOTXB

127.00

124.30

126.30

3,232,500

Gadoon Tex

73.50

69.00

73.50

388,300