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CURRENCY BUYING

SELLING

US Dollar 59.9 60
Bahrain Dinar 158 158.1
Canadian $ 50.85 50.95
Euro 70.75 70.85
Hong Kong $ 7.65 7.7
Japanese Yen 0.508 0.51
Kuwaiti Dinar 204 204.1
UK Pound 103.7 103.8
Last updated: Friday 23 Dec, 2005-12.30 P.M (PST)

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3 DAYS FORECAST
In oC

CITIES MIN MAX

HUM%

FOR.

KARACHI
Today 12 26 38 Sunny
Tomorrow 11 27 38 Sunny
Day after 11 28 38 Sunny
LAHORE
Today 1 20 87 Sunny
Tomorrow 2 20 87 Sunny
Day after 2 21 87 Sunny
ISLAMABAD
Today 0 18 59 Sunny
Tomorrow 0 18 59 Sunny
Day after 0 21 59 Sunny
HUM%: Humidity In %
FOR.: Weather Forecast
updated: Fri - Sun 23-25 Dec, 2005

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KARACHI         - 021 LAHORE          - 042 ISLAMABAD    - 051 FAISALABAD   - 041 MULTAN          - 061 PESHAWAR    - 0521 CANADA          - 1 KUWAIT           - 965 INDIA               - 91 IRAN                - 98 U.K                   - 44 U.A.E                - 971 U.S.A                - 1

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  CAPITAL MARKETS
 
 

 

 

 

 
  STOCK MARKET AT A GLANCE

By SHABBIR H. KAZMI
Updated Oct 08, 2005

MARKET THIS WEEK

Market sentiment remained buoyant on the first 3 trading days of the week, with the market gaining 356 points with strong volumes of around 500mn despite the fact that many quarters had been expecting a correction early in the week. The start of Ramazan brought down market activity and lower volumes were seen on the last two trading days. The market went down by 41 points (combined) on the last two trading days and there is a general perception that the correction has finally set in. Overall, the market showed a 3.85% increase (WoW).

OUTLOOK FOR THE FUTURE

Ramzan is expected to keep volumes low and we expect that the market might undergo a technical correction keeping in mind the steep rise in the index of late. Any news regarding the PTCL-Etisalat deal will affect the market sentiment as well. KAPCO's first quarter result announcement will generate some stock specific activity. We advise our investors to adopt a cherry picking strategy and go long in fundamentally strong scrips. Our top picks remain POL, Fauji Bin Qasim, National Bank, Nishat Chunian and Packages. Fundamental Changes

The major developments this week were:

•In its latest fortnightly meeting, the Oil Companies Advisory Committee announced an average of 7% upward revision in petroleum prices. As per our calculation, Pakistan State Oil is likely to record a pre-tax inventory gain of PRs357mn, while Shell is likely to book a pre-tax inventory gain of PRs142mn.

•ICI Pakistan Paints and Kanpe Paint Plant Engineering Japan have jointly set up a new Pretreatment, Electro Deposition and Topcoat Paint Facility for Hinopak Motors Limited.

•Nishat Chunian announced results for FY05 in which the company reported EAT of PRs722mn (EPS: PRs10.57), marginally higher than our expectations (KASB estimates, EAT: PRs715mn, EPS: PRs10.45). The company announced 20% cash and 10% bonus dividend.

•Both credit off take and Money supply (M2) remained at low levels in 2MFY06. As per State Bank of Pakistan (SBP), total credit off-take stood at PRs10.50bn compared to PRs22.12bn during 2MFY04.

•A 10-member delegation of Gazprom led by company's Chairman Alexey Miller Borisovich arrived in Pakistan on Thursday to begin formal discussions on the Iran-Pakistan-India (IPI) pipeline.

•The privatization of Pakistan Steel Mills Corporation (PSMC) has received a good response and 11 parties including 5 foreign parties from Middle East and Russia have submitted Expressions of Interest.

THIS WEEK'S TOP STORIES

NISHAT CHUNIAN; HIGH EXPECTATIONS ARE JUSTIFIED

Nishat Chunian is set to announce FY05 results on Wednesday, the 5th of October. We expect the company to outperform last years 12 months results in just 9 months this year and post after tax profits of PRs715mn (EPS: PRs10.45) for the 9 months which qualify as FY05 - 12% higher YoY than FY04 (EAT: PRs635mn,

EPS: PRs9.29). The heady combination of 1) record low cotton prices following a 14.6mn bale bumper crop; 2) merger with Umer Fabrics which added 39mn spindles; 3) massive expansion which together with the merger upped spinning capacity by 150% and weaving by 40%, back up our high expectations of NCL this year. We also expect a cash dividend of PRs2.5 per share. Against the backdrop of no quotas in the WTO, we see incremental growth materializing in NCL's future and maintain our liking for Nishat Chunian. Farrah Marwat (farrah.m@kasb.com)

TAX COLLECTION IMPRESSIVE BUT POOR TAX INCIDENCE!

Whilst tax collection remained impressive in the last fiscal year, we believe Central Board of Revenue (CBR) has been unsuccessful in broadening its tax base. This is evident in the detailed tax incidence accounts released by CBR. Manufacturing sector felt the highest tax incidence, as it contributed over 62.2% in total tax collection (compared to its 17.1% share in total GDP). Agriculture sector share in total taxes remained awfully low at 1.2% (compared to its 20.2% share in total GDP), followed by transport and communication (4.5%) and Wholesale & retail trade (2.8%). Total tax collection in the last fiscal year was recorded at PRs591.1bn (+ 13.5% YoY), whilst tax to GDP ratio remained relatively stagnant. We believe stagnation in tax-to-GDP is primarily attributed to the agriculture and services sector low tax compliance as compared to their due share in GDP. Given the tax collection figures released for 1QFY06 (PRs147.7bn) showing an increase of 20% YoY, we still believe CBR may fall short of its current year target (PRs690bn) as CBR has slashed duties on capital goods and did not impose any new tax on services and agriculture sector in the last budget.

PAKISTAN OILFIELDS LIMITED- EARNINGS REVISION

We are revising up POL's FY06 earnings by 11% to PRs6,294 (EPS: PRs47.90) and also raising our price objective by 2% to PRs474. The revision in earnings and valuation ensued from adjustment in our POL valuation model following release of POL's annual report that carried two surprises on the production front (1) early commencement of production from second discovery at Makori in Tal block (2) higher than expected production rate from Pindori field. POL's annual report has affirmed our stance of (1) strong earning growth coming from healthy volumetric increase (2) aggressive exploration policy. We expect listed JV partner in Tal block i.e. POL, PPL and OGDCL to benefit from early production initiation. We maintain our buy recommendation on POL, which offers 21% discount to its fair value cum PkR12.5 per share cash dividend announced for FY05.

DFML: FY05 RESULT PREVIEW

Dewan Farooque Motors Ltd. (DFML) is due to announce its FY05 result tomorrow. We expect the company to post earnings after tax of PRs345mn (EPS: PRs4.48) as against earnings after tax of PRs223mn (EPS: PRs2.90), a YoY increase of 54%. We expect the company to announce a cash dividend of PRs1.00/share, and possibility of a 5-10% bonus dividend cannot be ruled out (paid last year). The jump in earnings is likely to be fueled by top line growth of 37%, via a 33% increase in the number of cars sold and an upward revision of car prices twice during last year. We recommend a Neutral stance on DFML.

FFBL: EXPANSION PLANS REVISITED; REITERATE BUY

After a detailed discussion with FFBL's management, we have revised our earnings estimates for FFBL and upgraded our price objective to PRs47.90 from PRs45.05. Our new price objective implies a 33% upside from current levels. We have revised our earnings estimates upwards for 2005 by 6.7% to PRs2,541mn (EPS: PRs2.72). FFBL is currently working on its revamping plan for ammonia plant. It is expected to revamp the DAP plant after work on the ammonia plant is completed to utilize the excess ammonia capacity available. This is likely to lead to 60% increase in DAP production capacity by 1H07. Buy FFBL!!

MARKET ROUNDUP

 

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

39.60

41.02

3.59%

Avg. Dly T/O (mn. shares)

339.28

399.63

17.79%

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

537.46

730.93

36.00%

No. of Trading Sessions

5

5

22

KSE 100 Index

8225.66

8542.40

3.85%

KSE ALL Share Index

5444.32

5648.50

3.75%

 
 

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