CAPITAL MARKETS

 

1- FOREX KERB WATCH

2- COT WEEKLY REVIEW

3- FINEX WEEK

4. STOCK WATCH
5. STOCK MARKET AT A GLANCE
6. PAKISTAN WEEKLY REVIEW
7. RECORD LISTINGS AT THE KARACHI STOCK EXCHANGE

 

STOCK MARKET AT A GLANCE

 

By SHABBIR H. KAZMI
Updated July 02, 2005

 

 

The week kicked off with rumors of Etisalat backing out of PTCL transaction, seeing the index shed off 1.29% in a single day with PTCL hitting its lower circuit. However, sanity prevailed regarding the issue and the market more than recovered its losses the following day. Positive news flow in the form of Etisalat having deposited 10% of the bid money, which injected confidence in the market while speculation on revival of Badla kept sentiments tilted towards the positive side. Widely anticipated hike in petroleum prices contributed to activity in OMCs, especially PSO. The week ended with a positive change of 1.5% WoW.

OUTLOOK FOR THE FUTURE

While the PTCL euphoria is gradually exiting the market, we expect other issues to enter the limelight in the weeks to follow. Any developments on extension in badla financing could prove to be a positive turning point with far reaching implications for fortunes of the market. In addition, keenly awaited announcement of NIT's dividend for financial year 2005 should see interest in banking scrips - Faysal Bank, BOP and National Bank. Key stocks to focus on should be Callmate Telips, KAPCO, POL, Faujis and Packages.

FUNDAMENTAL CHANGES

The major developments this week were:

•Pakistan's under-water optic fiber link has been damaged severely impacting internet and phone services. ISPs, Call centers and LDI license holders (Callmate, Telecard, Worldcall) are the most affected by the break down. PTCL's operations too are being affected through international calls and Internet traffic. Repair has commenced and will be completed within the next couple of days.

•Privatization Commission held the a pre-bid meeting today for sell-off of 85% shares of Mustehkam Cement on the 28th of June, while it is expected to hold the final bid meeting after a week.

•Economic Co-ordination Committee (ECC) met cement manufacturers to discuss the recent hike in cement prices. The current upsurge in cement prices is likely to affect CPI inflation through Housing Rent Index (HRI), which constitutes 23% of the CPI basket and has already been reported 11.25% higher YoY during the first 11MFY05. Government has given 2 weeks deadline to cement manufacturers to bring prices down to the pre-budget level.

•Textile exports have increased by 4.9% to US$7.63 in the first 11 months of FY05 (11MFY04: US$7.27). We would point out that in the five months since January 05, textile exports are up by 9.36% to US$3.76. The breakup of figures reveals that the greatest growth has been in garments (up 36%) followed by made-ups (14.3%), and bed wear (12.6%).

•Oil and Gas Development Company Limited (OGDCL) issued a clarification on the Chanda Field securitization deal, stating that OGDCL is not a party to the financing arrangement. Zaver Petroleum, which holds 10.5% Working Interest in Chanda Field alone is responsible for meeting its financial obligations.

•Natural gas prices have been increased by an average of 5.81% for domestic, commercial, industrial and power sector companies. The increase in prices would enable gas utiliites to maintain their profitability under the guaranteed return formula but power and fertilizer companies are likely to see an increase in their cost of production, one they are likely to pass on.

•The government has decided to issue PkR8bn (inclusive of PkR3bn under green shoe option) through Wapda Bonds to finance Mangla Dam Raising project. The project is expected to have a total cost of PkR62bn and its scheduled to be completed by 2009.

•As per newspaper reports quoting Etisalat CEO Obaid Bin Meshar, Etisalat will soon announce an expansion plan for PTCL and other measures for overall improvement of the telecom sector in Pakistan

•US Crude traded at a new high of US$60.95/bbl early in the week before settling below US$58/bbl by week ending on news of US Inventory data.

TEXTILES IN PAKISTAN; WHERE WILL IT GO?

The buzzword of the present day appears to be textile. With the culmination of the quota regime on the 1st of January 2005, all eyes have turned towards this sector. It is blatantly clear that a whole new opportunity set has come into play. As the heavyweight of Pakistan's exports (approximately 65%), the sector has been on the receiving end of a substantial amount of investment to avail the quota free regime. Growth in the industry is augmented by the 'textile friendly' budget released earlier this month, which makes capital investment in textiles more feasible. The question everyone is asking is to what extent Pakistan's textile producers are going to capitalize on these developments and what sort of growth can be expected.

 

 

FFBL-COMFORTABLE ON COSTS

FFBL will be the major beneficiary of continuous upsurge in domestic urea and international DAP prices. While fertilizer companies are increasing fertilizer prices in response to increase in input cost, we are expecting 23% YoY improvement in cash margins on DAP to PkR378/bag from PkR308/bag, and 10% YoY improvement in cash margins for urea to PkR243/bag from PkR221/bag for FFBL during CY05 with 5% increase in urea and 10% increase in DAP prices where the major cost components for the both urea (feedstock gas) and DAP (phosphoric acid) remained largely constant during the remaining part of the year.

We remain bullish on FFBL in the long term with a target price of PkR45/share.

CHENAB LTD-NEW PLAYER ON THE KSE

Chenab Limited, a well-established name in the textile industry is being provisionally listed on the KSE today with the IPO scheduled for 13th and 14th of July. Chenab Ltd is a sizeable vertically integrated textile producer with an export driven focus, its primary areas of production being home textile products and woven garments. With 24mn shares at PkR18/share on offer, there is an opportunity to gain exposure to the growing textile sector. With a commendable growth history (four year earnings CAGR of over 10%), we expect Chenab to continue with the upward trend and expect NPAT of PkR 244mn (EPS: PkR2.13 for FY05).

CALLMATE- GO LONG, STAY LONG!

Our liking for Callmate Telips Telecom Limited (CTTL) keeps growing. Be it their successful promotional campaign or highly impressive future plans, the company is currently scoring on all fronts. Their international calling cards are on the verge of being launched, while the "50% extra talk-time" scheme has exceeded even the management's expectations. Corporate customers and local loop operations remain the company's short-term priorities. Coupled with favorable regulatory rulings, our liking for the stock is further reinforced. While our favorable medium term outlook for the company is intact, couple of accounting adjustments could possibly dampen current year earnings. A "not-too-accommodative" PTCL post privatization however remains the key threat to Callmate. We recommend a BUY for Callmate Telips with a target price of PkR68 per share translating into an upside potential of 79%.

POL PRICES-LIFTING THE CAP

The government has finally lifted the cap on domestic petroleum prices after almost 3 months as petroleum product prices were revised upwards by an average of 7%. Despite the hefty increase, domestic petroleum prices are still at least PkR3-5/litre below what they should have been had the government passed on the entire impact to the end consumer.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

34.24

34.72

1.40%

Avg. Dly T/O (mn. shares)

233.87

199.24

-14.81%

Avg. Dly T/O (US$ mn.)

428.13

357.34

-16.53%

No. of Trading Sessions

5

5

24

KSE 100 Index

7350.46

7464.60

1.55%

KSE ALL Share Index

4817.34

4884.98

1.40%