Updated June 11, 2005



Bank of Khyber has been permitted to list its shares on local bourses, according to a news report. The bank plans to offer 40 million shares through the market at a price of Rs15 per share. The offer may hit the market in 3Q2005. As of 31st March 2005, the paid up capital of the bank was Rs1.23 billion. The bank currently has 29 branches, a deposit base of Rs13.9 billion along with advances amounting to Rs9.3 billion.

Abamco Limited, Pakistan's premier Asset Management Company has launched Pakistan's first free float adjusted market capitalization index. Current indices in Pakistan are usually based on full market capitalization methodology. In contrast, Abamco-30 is based on an advanced free float adjusted market capitalization factor. This takes into account that part of the share capital of a company is available for trading. The index is further calibrated to include stocks of companies with fundamentally sound business prospects, showing a viable degree of market liquidity, sectoral representation in the GDP and fair prospects for future growth.

Initially, the market rallied strongly behind a pro investment budget but all the budget induced euphoria seems to be proving short-lived. According to some analysts, this is a routine act of this market as witnessed in the recent past. The market is not moving on technicals or fundamentals. It's rather making moves on news flow or on rumors. Outrageous rumor regarding resignation of Shaukat Aziz from PM's position was rife, which led punters to ease off their long positions. The combination of better economic news in the federal budget, good earnings and favorable results from most of the companies is not driving the market. PTCL has become the linchpin behind market momentum. The market is taking cue from the drama unfolding in the wake of its privatization process.

The proceedings on PTCL front are also expected to have adverse implications on the long list of 'to-be-privatized' transactions. Transactions such as PSO, SNGPL, SSGC and Pakistan Steel Mills to name a few are on the privatization priority list of the government. The latest episodes have hampered the progress on the transaction. In addition, the international community would not have been impressed by the manner in which the transaction has been stalled mid-way. The manner in which events are unfolding is likely to be a concern for any party interested in acquiring management control of the state-owned entity.

The KSE performance is expected to remain range bound over the near-term as liquidation of Badla position is likely to result in a supply overhang in the market. Badla positions in the remaining 7 stocks stand frozen as of 7th June 2005 and have to be reduced by 8.25% every week. With margin financing still not available, the volumes at the KSE are likely to take a dip, which in turn is likely to affect KSE's performance. The only trigger for the market remains the progress on PTCL's privatization. Any delay can significantly affect market sentiment. While the weekly reduction in Badla position in absolute terms is not very huge, the fact that with lack of any of facility to take leveraged positions is likely to create a supply overhang in the stock market. Even if margin financing is introduced over the next few weeks, the investor and broker fraternity will take some time to adjust to the new financing mechanism.



The highest bid of Attock Oil Group, (comprising of Attock Refinery, Pakistan Oilfields and Attock Petroleum) has been approved by the CCoP. The Group had submitted a bid of Rs483 per share for acquiring 51% shares along with management control of National Refinery. The Attock Oil Group companies are cash rich, possessing cumulative cash balances in excess of Rs12 billion with no debt as of March 31, 2005. The acquisition cost of Rs16.4 billion is higher than the cash available and analysts expect the consortium to also use leverage to finance the acquisition. The Group should have no problem in raising debt. It has a combined equity base of Rs15.3 billion with no debt, translating into debt raising capacity of approximately Rs61 billion. Although the acquisition price exceeded general expectations, NRL acquisition will allow Pakistan Oilfields to reap benefits of NRL's lube business. More importantly, the aggressive bid makes the Attock Group a serious contender for PSO and NRL acquisition appears part of the strategy. The acquisition will alter POL's capital structure, and is expected to result in a stock dividend this year instead of a cash payout. A bonus payout will be supported by strong expected earnings growth over the next few years. With 'competition' from just two other bidders and a bid price that was 'more than the reference price', some analysts feel Attock Group could have gotten NRL cheaper. The refinery, however, does have its plusses.

Being the only lube based refinery in the country, NRL provides better investment platform in a deregulated market as compared to its other listed peers. While other pure fuel-based oil refineries have their dividend 'payability' capped at 50% of paid-up capital, NRL's lube business does not come under this restriction, allowing NRL the ability to pay a higher effective dividend.