CAPITAL MARKETS

 

1- FOREX KERB WATCH

2- CFS WEEKLY REVIEW

3- FINEX WEEK

4. STOCK WATCH
5. STOCK MARKET AT A GLANCE
6. PAKISTAN WEEKLY REVIEW

 

STOCK MARKET AT A GLANCE

 

By SHABBIR H. KAZMI
Updated Sep 24, 2005
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MARKET THIS WEEK

Market opened on a positive note on Monday and better than consensus dividend announcement by Oil & Gas Development Company Limited (OGDCL) kept the momentum going and the index crossed the psychological barrier of 8,000 points on Tuesday. Wednesday was however the best day of the week, as a comfortable cushion was created between the index and the 8,000 point mark. Increase in oil prices and rumored foreign interest combined to lead the rally. The rally on Wednesday ensured that despite rumors of Etisalat backing out of PTCL transaction on the last two days, the index closed in the green and comfortably over the 8,000 point mark. On a WoW basis the index surged by nearly 250 points. Outlook for the Future Board Meeting of PTCL seems the possible trigger for the market. Announcement of a skimming dividend by PTCL will be taken positively and could see a rally in the stock. On the other hand, with the rumor mill working overtime on PTCL, fluctuations in PTCL's stock price cannot be ruled out. Board Meetings of the Sui Twins and the turnaround story 'Callmate Telips' should also generate stock specific activity. International oil prices and any volatility due to Hurricane Rita should keep oil punters interested. Our top picks remain POL, Callmate Telips, Fauji Bin Qasim, National Bank and Packages.

FUNDAMENTAL CHANGES

The major developments this week were:

•The government is continuing its policy of increased dependence on inexpensive, indigenously produced fossil fuel and has approved gas allocation for power generation, fertilizer production and CNG stations.

•Maple Leaf posted after tax earnings of PkR727mn (EPS: PkR2.69) for FY05, 49% higher YoY and 10% higher than our expectations. The company also announced 10% bonus along with the results.

•To bring certainty in the system, the government is considering hedging its oil bill at a certain price level

•As per newspaper reports PTCL has not renewed the contracts of employees, employed by Telecom Foundation and working under contractual agreement with PTCL

•Indus Motor Company announced FY05 results posting earnings after tax of PkR1,484.6mn (EPS: PkR18.89) as against 1,473.3mn (EPS: PkR18.74) last year, up 1% YoY

•OGDCL announced FY05 results posting PAT of PkR32,968mn (EPS PkR7.67) and declared a final dividend of PkR2.75 taking full year dividend to PkR7.50 per share

•Dawood Hercules Chemicals (DH) is scheduled to hold an Extra Ordinary General Meeting on 12th October. Among other items, a resolution allowing purchase of 62 million additional shares of Sui Northern Gas Pipelines Limited (SNGPL) over the next twelve months will be presented for approval

•Nishat Mills announced results for FY05, posting PAT of PkR1,505mn (EPS: PkR10.36). The company also announced a 25% cash dividend for the year

•According to the provisional figures released by FBS, Pakistan recorded a trade deficit of over US$1.55bn (+276% YoY) in the first two months of current fiscal year

•Reportedly Oil and Gas Development Company Limited (OGDCL) has discovered oil and gas in Tando Allah Yar North well-I. Moreover, the company has been granted two more exploration licenses over blocks number 2467-8 (Thatha, Zone II) and 2870-2 (Bagho Bahar, Zone III)

•The Privatization Commission has appointed Price Waterhouse Cooper as consultant for a speedy sell-off of SNGPL and SSGC.

•The SECP has approved US$19.2mn (PkR1.15bn) debt to equity conversion of Pakistan Cement Company (PCC - formerly Chakwal Cement) to Orascom Construction Industries (OCI)

NISHAT MILLS LTD: FY05 RESULTS PREVIEW

Nishat Mills is due to announce results for FY05 today. We expect the company to post after tax profits of PkR1,631mn (EPS: PkR11.22) 117% YoY compared to PkR751mn (EPS: PkR5.17) earned in FY04. This despite the fact that 05 results correspond to only 9 months operations, due to change in accounting year end. Exceptional Other Income in 1QFY04 boosts the bottom-line. Expected core earnings for the period equal PkR1,267mn (EPS: PkR8.71) still 69% higher YoY than FY04 and 181% higher than 9MFY04. We anticipate higher gross margins for FY05 at 23.8% (as compared to 18% last year) as a result of record low cotton prices. Going by NML's track record, a dividend of PkR2-2.5 can be expected. We do not rule out the possibility of a bonus with the results. We are positive on growth in NML following quota removal as well the company's PkR3bn capex plan over the next years.

 

DG KHAN CEMENT — FY05 RESULTS

DGKC - Deceptively good numbers DG Khan Cement announced FY05 results yesterday posting after tax earnings of PkR1,628mn (EPS: PkR8.83), 96% higher YoY. The company also announced PkR1.50/share cash dividend with the results. Growth in earnings is driven by 22% YoY growth in sales volume and capital gains booked on sale of investment. Excluding the impact of other income, high cost of manufacturing cement has hit DGKC margins hard leading to 67% QoQ drop in earnings (excluding other income). On QoQ basis, retention levels improved by 7% as against 17% increase in cost per bag leading to 300bps drop in gross margins (to 35%) for 4QFY05. Going forward we expect further decline in margins and earnings (EPS:4.83) for DGKC during FY06. We recommend SELL for DGKC at current levels.

NEW UREA PLANT

The Growth engine! Since the Economic Coordination Committee (ECC) has already agreed to supply gas to one new fertilizer plant. Gas prices bid would be the key-deciding factor for the government to choose between the two (Engro/FFC). We believe Engro is likely to gain the nod from the government: 1) Aggressive management stance (leading to high offer price); 2) Lower execution time; and 3) No Monopoly control issues. Government approval for this is likely to take another 3-4 months while allocation of this would change our stance on Engro from "No Growth" to a "Growth Company".

ICI PAKISTAN

Things Have Started Shaping Up! We recently met the company's management to discuss their plans. The company has a current capex plan of US$30mn, which includes asset modernization of the PSF segment (coming online in the first half of CY06) and 20% capacity enhancement in the Soda Ash business (coming online in the first half of CY07). 1H05 results of the company were exceptionally higher than expectations and the company posted an EPS of PkR4.73 as against PkR2.45 (93% growth YOY) in the corresponding period last year, indicating the possibility of a robust performance going forward. We are currently revising our fair value for the scrip.

ENGRO'S LIKELY EXPANSION

Value additive! With the government's approval to allocate gas to Engro for a new urea plant, we would be changing our stance on Engro from "No growth - Neutral" to " Growth story - Buy". Subsequently, we would be revising our DCF based fair value from PkR113.07/share to PkR176.23/share. We expect the new project to cost PkR30bn or US$500mn, which is expected to take 3 years (2009) to implement after the financial close. We are expecting Engro to report a drop in earnings during the first two years of project commencement, owing to high depreciation & financial charges. However, we expect substantial growth in the top line (6 year -CAGR 8%) and improvement in margins (fixed feedstock cost for the new plant). Meanwhile we are not ruling out the possibility of dilution of earnings & valuation (Rights expected in 2007) for Engro.

MARKET ROUNDUP

..

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

38.06

38.97

2.39%

Avg. Dly T/O (mn. shares)

351.74

386.98

10.02%

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

492.43

629.42

27.82%

No. of Trading Sessions

5

5

 

KSE 100 Index

7934.54

8179.90

3.09%

KSE ALL Share Index

5259.09

5395.17

2.59%