FINANCE

 
1- NIT INCOME GROWS BY 21PC
2-
OIL HIKE DOMESTIC MAGIC WANDS
 

NIT INCOME GROWS BY 21PC

.

Income growth was driven by higher dividend receipts and capital gains

 

By SHABBIR H. KAZMI
Apr 25 - May 08, 2005
.

National Investment Trust (NIT) is Pakistan's oldest and the largest mutual fund. Lately it has declared 9-month financial results. The success of the fund can be gauged from Fund's Net Asset Value (NAV), which grew by 47.3 per cent during the period to Rs44.96 as on March 31, 2005, from Rs30.53 on June 30, 2004 (ex-dividend).

Tariq Iqbal Khan, Chairman and Managing Directors of NIT on 16th April, informed that the Fund had outperformed KSE-100 index by a margin of 0.1 percent, "despite the fact that the increase in KSE-100 index was purely on the back of very few stocks whereas NIT strategically remained underweighted". He affirmed that unrealized gains as on 31st March stood at Rs11 billion had climbed to Rs12 billion, which showed that the March turmoil did not result in any meltdown.

NIT which holds a phenomenal Rs70 billion under its management was reported to have posted net income amounting to Rs4.3 billion, which was 21 percent higher than Rs3.5 billion in the corresponding period of the previous year. This translates into earning per unit of Rs2.93 as compared to earning per unit of Rs2.28 in the same period of last year, showing a growth of 28.5 percent.

The earning of NIT was driven by dividend income as well as capital gains. Dividend amounted to Rs2,707 million, 31 percent higher compared to Rs2,061 million earned in the same period last year. The enhanced dividend income was attributed by the NIT chairman due to portfolio restructuring exercise that started few years ago with the objective of improving dividend yield and quality of portfolio.

Capital gains realized during the period amounted to a record level of Rs2.4 billion, which was 44 percent higher than Rs1.6 billion earned in the corresponding period last year.

Tariq Iqbal said that sale of NIT units stood at Rs4 .4 billion (including CIPs) as against redemption of Rs9.6 billion. "All redemptions were met to the utmost satisfaction of investors that helped in further enhancing confidence of unit holders/investors", said the NIT chairman. In spite of those redemptions, the net assets of the Fund had depicted robust growth of 34.5 percent by increasing from Rs49.5 billion as on June 30, 2004 to Rs66.6 billion as on March 31, 2005.

The NIT chairman recalled that after rising to an all-time high of 10,303 points on March 15, the KSE index had undergone huge 'downward technical correction' of 25.1 percent and dropped to 7,708 points level on March 28, 2005. As against this, the Net Asset Value of NIT unit decreased by 17.9 percent during the same period. This clearly shows the strength of its portfolio in the declining market, the rate of decline of NIT units was significantly low, translating into out performance of the KSE by 7.2 percent.

Tariq Iqbal also said that increase in discount rate would not affect the earnings of the trust or the companies selected by its able team, as it has mostly invested in the cash rich companies. Dilating his point he said, "Fauji Fertilizer and oil and gas companies have ample funds in their reserves and in the coming years they would not need any borrowing from the financial institutions."

NIT has always been an active player in equities market. Lately, it has also started investing in term finance certificates. According to Tariq Iqbal, this diversification is expected to ensure stable income to the unit holders.

Keeping in view the improving corporate earnings, NIT is expected to posted higher profit for the current fiscal year as well as pay higher dividend among the unit holders.

Yet another development to be watched is privatization of NIT. It is believed that the government has decided to split NIT portfolio into five parts. Bulk of it would go to Bank of Punjab, National Bank of Pakistan and Faysal Bank and remaining would be split in two parts.

The investment portfolio of NIT is around Rs70 billion. Currently, about 70% of unit holders belong to financial sector. Therefore, it may not be wrong to say that those institutions, which had bought the units at one-forth or half of the current unit price might have made substantial gains be selling the units and also reinvested the amount in the equities market.

10 YEAR PERFORMANCE

Year

Net Assets
( Rs in Million)

N A V (Rs/Unit)

Highest Issue Price

Lowest Redemption

June-04

49,508

30.53

(Rs/Unit) 36.15

(Rs/Unit)21.65

June-03

31,629

20.58

23.65

10.60

June-02

17,414

10.89

13.75

7.45

June-01

16,062

9.16

12.05

9.20

June-00

18,648

10.69

14.85

7.50

June-99

13,555

7.19

9.45

5.70

June-98

11,810

6.53

14.00

6.75

June-97

24,942

12.02

14.00

13.70

June-96

34,103

13.82

15.10

13.70

June-95

32,927

14.43

16.00

13.70

June-94

46,455

25.28

15.60

12.90

June-93

28,896

18.53

15.20

12.70