A weekly review
During the week
an overall flat trend was witnessed with the KSE-100 index
increasing by a mere 0.9% to the 7464.60 point level. The start of
the week was promising especially in the wake of PTCL's historic
privatization rally was short lived on the squaring of the futures
positions and the ongoing phasing out of carryover transactions,
thereby creating a financing gap in the market.
short-term beneficial implications of high oil prices, the cheerful
investors' sentiments towards PSO, OGDCL, and POL. Other fuel and
energy plays especially scrips having dollar based financial support
may trigger positive activity in the capital market on the back of
improved dollar position against European currencies.
index was however compelled to swing at almost breakeven level
during the week. Overall activity was lackluster as has been mostly
observed at the end of the week on Fridays. The ongoing tussle
between the KSE and SECP created confusion among the investors
regarding the phase out of badla and accessibility of margin
speaking, the market sentiment was sluggish as the broker and
investor community is awaiting news regarding the investigation
report of the March 2005 stock market crash. The market, however,
moved aimlessly while its future course depends much on the
regulatory front with respect to the financing matters.
The launch of
Chenab Limited IPO for 30 million ordinary shares at a price of Rs10
plus a premium of Rs8/- was one of the highlights of the week. The
subscription date of July 13-14 is expected to draw attention of the
investors on the back of strong sailing of the group in textile
exports. The provisional trading at Rs28 after listing with the KSE
was however a positive indicator of the success of the Chenab IPO.
The timing for launch Chenab IPO however shows the confidence of the
The managers of
the three stock exchanges of the country have however expressed
their dismay over what they called indifferent and cold attitude of
the banking sector towards implementation of newly introduced margin
financing. While the COT was waning out on one hand the banks were
not spontaneous to the financial need of the investors. The
transition process from COT to margin financing created a wide gap
between demand and supply in the market.
It is worth
mentioning that the National Bank of Pakistan launched its margin
financing operations in Karachi in conformity with the directives of
the SECP. They are also planing to extend the financing facility in
Lahore and Islamabad before the final date of August 26.
Contrary to the
complaints of the trading community over what they observed
inaccessibility to margin financing, the consortium of the banks
claims that they have made available over Rs18 billion wroth of
credit lines for margin financing.
however remained in circulation either for restoration of badla
system, rescheduling of the time-frame for phasing out of badla
allowing another year to make it effective or consideration for
parallel running of the two systems as in vogue in neighboring
amongst the textile scrips, Nishat Chunian is capturing the eyes of
the investors in view of splendid earnings growth prospects ensuing
from expansionary and export-led growth in revenues.
Chief research analyst of Live Securities while discussing company's
financial results said that the company's Oct - March 2005 earnings
depicted a 119% increment resulting from capacity augmentation,
lower cotton prices and effect of merger with Umer Fabrics.
during FY05 have been substantially boosted on sharply lower cotton
prices. estimate Nishat Chunian's cotton costs this season to be
approximately Rs2,000/md, at least 40% lower as against over
Rs3,000/md last year. Nishat Chunian's FY05 annualized earnings are
expected at Rs1, 028 million, translating into an EPS at Rs15.04,
62% higher YoY. The company also plans to augment its weaving
capacity by 13%. Moreover, Nishat Chunian's dyeing and finishing
unit is expected to start operations during the second half of
CY2005. The FY06 budgetary announcements bode extremely favorably
for the textile sector in the form of liberalization and
rationalization of the tariff and taxation structure.
In the recent
past, Nishat Mills has made expansions in almost all areas including
spinning, weaving, printing, dyeing, stitching and finishing. The
company's weaving products have penetrated the Central American,
Spanish, French and Portuguese markets. Nishat Mills also intends to
further tap new markets in the value-added segment in order to boost
revenues and profits. FY05 annualized core earnings projected to
improve 307.1% to Rs1, 167million Investors should note that
following regulatory directives, from 2005 the year-end of the
textile sector companies will be June instead of September i.e. the
audited accounts for FY2004-05 will be for the nine months period.
Going forward, Nishat Mills' core profitability is to be supported
on the back of upbeat sales volumes and improved product prices.
Volumes are to be fuelled on the impact of capacity additions and
higher utilization levels. Another significant contributor is to be
Nishat's continuing focus on product innovation, value-addition and
developing strategic alliances with global textile players.
Excluding other income, Nishat Mills' FY05 annualized earnings are
expected at Rs1, 167million, translating into an EPS at Rs8.04,
307.1% higher YoY.