STOCK WATCH

 

 

By SHABBIR H. KAZMI
Updated Jan 08, 2004

 

Over the week the KSE-100 index gained 100 points to close at 6318 level on Friday. Market remained extremely volatile on last trading day. The index fluctuated over 150 points before closing 34 points below its previous day's level. While selling was evident across the board in the second half, banking sector continued to support the market with MCB in the lead. It also appeared that the much awaited correction was in full swing but the recovery was remarkable.

 

 

The overflowing liquidity and continuous inflow of positive news has led to an unstoppable hike in the index level. With momentum still looking strong, the long-term outlooks still look intact. However, at current levels, it is important to be able to identify where the market is heading and act accordingly.

The Central Depository Company has prohibited the use of Group Accounts from January 6 onwards and will discontinue dealing in them altogether from March 31, 2005. The Chief Executive of CDC, Hanif Jakhura, commenting on the prohibition said that this was decided after approval from the Securities and Exchange Commission of Pakistan. Citing reasons for the move, the CEO said that the CDC was promoting investor accounts which were far more beneficial and transparent and handling them did not entail much risk.

The Public offering of Kot Addu Power Company (KAPCO) will be made at Rs 30/share. The offering price was approved in a recently held meeting of the Cabinet Committee on Privatization. As has been witnessed in the recent government divestments, priority will be given to smaller applications, consisting of a lot of 500 shares. With the clearance of the offer for sale document of KAPCO by the Karachi Stock Exchange, the public offering would be held in the third week of January. In addition, the CCoP has also approved further divestment of shares of OGDC. The government is planning to divest further 5% shares (215 million shares) of OGDC through the stock market. The offer price for the divestment of OGDC is likely to be at a discount to its three month average price, a formula which the Privatization Commission has used in the past.

The Oil and Gas Regulatory Authority is organizing a public hearing in the month January for a public hearing on the tariff review petition filed by Sui Southern Gas Company and Sui Northern Gas Pipelines (SNGPL). Both the gas utilities have sought a review in their tariff in view of rising wellhead gas prices. SSGC has sought a tairfff increase of Rs 13.37/mmbtu and SNGPL has sought an increase of Rs 12.55/mmbtu for January 2005. The proposed hike in down stream tariffs is not likely to have any major impact on the profitability of the Sui twins, because profitability is linked to their asset base. However, the tariff hike sought by the two gas utilities does indicate the extent to which the average wellhead gas prices are expected to increase. The major beneficiaries of revision in wellhead prices are the upstream oil and gas producers. With international oil prices tapering off, the companies in which natural gas accounts for most of the revenues, are likely to see robust growth in their profitability in the coming six months.

Al Meezan Investment Management has informed about the amount received towards subscription initial public offering of Meezan Balanced Fund. According to the letter sent to the KSE, the issue was over-subscribed by 24% as applications worth Rs 371.676 million were received against the offer size of Rs 300million. Out of the total 1,297 applications, 843 applications worth Rs 4.215 million were received for 500 shares each.

ODGC

The Oil and Gas Development Company, OGDC, would become the first listed company in Pakistan to attain a free-float of over half a billion dollars, following the secondary 5% divestment of government holdings in the company. The Privatization Commission has already announced the second offer of 5% shares of OGDC after the initial offering of Kot Addu Power Company was scheduled for this month. The second selling of 315 million shares at the current average market price would raise the value of free-float to 32 billion rupees equivalent to more than 500 million dollars.

LUCKY CEMENT

Lately there were news regarding cracks in cement cartel. But analysts expect it to remain intact at least for another 2-3 years. However the survival of the cement cartel would become questionable with the implementation of the expansion plans in the post-2006 era, when it would be difficult for the cartel to revise the rated capacities every other quarter. The existing method of quota allocation could be the biggest potential weakness of the cartel itself. It is possible that the existing volume leaders may themselves disagree with the current cartel arrangements after 2 years. Lucky is emerging as the market leader with the implementation of its massive expansion plans of 16800tpd, which will help the company to gain pricing power as well as to exploit the growing demand of cement in the domestic as well as exports market. The company is likely to finance its Rs 12 billion expansion plans partly through debt and partly through internally generated funds. The company is not expected to announce a rights issue owing to its low gearing ratios.

Company

High

Low

Closing

Week's Turnover

P.T.C.L.A

46.15

44.35

46.15

393,009,000

M.C.B.XD

68.80

61.30

68.80

254,030,500

Oil&Gas Dev.

74.50

72.60

72.60

218,896,600

B.O.Punjab

69.75

67.25

69.75

182,508,000

Fauji Fert Bin

30.70

30.20

30.20

178,030,000

National Bank

90.45

81.30

90.45

172,800,000

Sui South Gas

28.75

26.30

27.70

149,485,000

P.S.O.

307.50

286.95

299.00

139,183,400

Hub PowerXD

31.35

30.95

31.00

42,221,000

Fauji Fert.XB

142.85

137.70

142.85

26,471,700