Market sentiment swayed with the PTCL results and
rumors regarding the privatization deal with Etisalat. The market
opened on a positive note on Monday based on expectations of a
higher dividend payout by PTCL and the SECP's decision to disallow
broker-to-broker deals took backstage. However, PTCL's decision to
skip the dividend dampened the positive sentiment and downward
pressure in the market was seen. On Thursday, rumors regarding a
possible back out by Etisalat from the PTCL deal dragged the market
down. However, the market reacted positively on Friday to the
statement by Etisalat that the PTCL deal is still intact. Overall,
the market showed a 0.56% increase (WoW).
OUTLOOK FOR THE FUTURE
The market will remain sensitive to any news
regarding the Etisalat-PTCL deal. Some quarters have taken the
skipping of PTCL dividend as positive for the privatization deal.
However, any statement from either Etisalat or the Privatization
commission would drive the market sentiment and a major spill over
effect on other stocks is expected. We advise our investors to go
long in fundamentally strong scrips. Our top picks remain POL,
Callmate Telips, Fauji Bin Qasim, National Bank and Packages.
The major developments this week were:
•PTCL announced after tax profits of PkR26.6bn
(EPS: PkR5.22) 5% lower YoY and skipped the dvidend
•SSGC announced posting Net profits of
PkR1,013mn (EPS: PkR1.51) 2% higher (YoY) and declared a dividend of
PkR1.5 per share
•Pioneer Cement posted after tax earnings of
PkR332mn (EPS: PkR2.30), 22% YoY drop
•SNGPL posted earnings after tax of PkR2.7bn
(EPS: PkR5.52) and declared a dividend ofPkR3 per share
•Callmate Telips Telecom Limited announced FY05
results posting after tax profits of PkR432.28mn (EPS: PkR8.60); up
539% YoY and 3.5% higher than our expectations.
•Kohinoor Textile Mills Limited posted EAT of
PkR88.5mn (EPS: PkR1.00) unadjusted for the 10% bonus issue also
announced with the results.
•Iran has no intention of calling off the gas
projects (US$22bn LNG project & US$7bn pipeline project between
India, Iran and Pakistan).
•Wateen Telecom, a subsidiary of UAE-based Al
Warid Telecom, launched on Monday a US$75 million project to lay an
optic fibre backbone across the country. The project is expected to
be nation wide, covering 5,000 kilometers.
•The Cabinet Committee on Privatization (CCOP)
approved the sale of 73% sta ke, plus management control of the KESC
to a reconstituted consortium of Hassan Associates, Al-Jomaih Group
of Saudi Arabia and Premier Mercantile at a bid price of PkR1.65 per
share (about PkR15bn).
•In a much-awaited development, the European
Union (EU) has reduced the anti dumping duty on Pakistani bed linen
on average by 3.2% to 9.9%.
•SECP has decided to prohibit stockbrokers to
transact business from fellow brokerage houses, starting from
October 10, 2005.
•The CEO of MOL group has hinted at an increase
in gas production from Tal block in January 2006 to 50MMCFD from its
current production of 35MMCFD.
•Etisalat has reiterated its commitment to the
PTCL transaction ruling out rumors of a back out ???Central Board of
Revenue (CBR) has collected PkR129.5bn in 1QFY06 as compared to
PkR123.3bn during the same period last year.
THIS WEEK'S TOP STORIES
PTCL- FY05 RESULT PREVIEW
Pakistan Telecommunication Company Limited (PTCL)
is expected to announce FY05 results tomorrow, 27th September 2005.
We expect the company to post after tax profits of PkR27,613mn (EPS:
PkR5.41), 5% lower compared to PkR29,170 (EPS: PkR5.72) last year.
(Note: These are only numbers for the fixed line segment because
this is what the market keeps track of). We expect the employee
strike in the fourth quarter of FY05 to have impacted the company's
financial performance during the period. As a result, the
outperformance during the first nine months of current fiscal year
is likely to be nullified during the last quarter.
The excitement this time however is likely to
hover around the dividend payout rather than the earnings figure as
punters bet on a skimming dividend. We do not rule out the
possibility of such an occurrence and our base case forecast for
dividend stands at PkR3.50 per share taking the full year dividend
to PkR5.50 per share (pay out ratio greater than 100%).
CALLMATE TELIPS - RESULT PREVIEW FY05
Callmate Telips Telecom Limited (CTTL) is to
announce FY05 results today, September 27, 2005. We expect the
company to post profit after tax of PkR418mn (EPS: PkR8.31) compared
to PkR68mn (EPS: PkR1.35) during FY04. The six-fold jump in
profitability is mainly due to the timely acquisition of Long
Distance & International (LDI) license that the company acquired
in early 2005. Resultantly, we expect the company's gross margin to
have surged to around 28.5% for FY05 compared to 19.5% during FY04.
Going forward, the company faces a threat from emerging competition
and the lurking Etisalat. The company has played its cards well so
far and if it can hit the right strategy for last mile connectivity,
our positive stance would be further reinforced. Our fair value for
the stock stands at PkR68 per share offering a 21% upside at current
PTCL FY05 RESULTS: NO DIVIDENDS - POSITIVE?