MARKET THIS WEEK
The market remained volatile
during the week (which had only 4 trading sessions). Things started on
a positive note on Monday indicating that the correction phase was
perhaps over. However, the market shed 173.5 index points (combined)
on Tuesday and Wednesday. Considerable panic was seen among investors
and dry volumes depicted that many were keeping to the sidelines. A
recovery was witnessed on Thursday as the market gained 84.17 points
to close at 8,319.29. The unresolved PTCL-Etisalat issue has weakened
investor confidence and rumors regarding the issue fueled market
activity. Furthermore, the settlement of future contracts kept volumes
OUTLOOK FOR THE FUTURE
The unresolved PTCL issue is
going to dictate the market sentiment. With Eid holidays around the
corner and only a few trading sessions remaining, we believe that
market activity would be limited and the market could remain under
pressure. However, a major positive development on the PTCL issue
could provide a much-needed boost to the market sentiment. Under this
cloud of uncertainty, we advise our investors to go long in
fundamentally strong scrips. We recommend a buy on Azgard Nine, Chenab
Ltd, Fauji Bin Qasim, KAPCO, ICI Pakistan, Nishat Chunian, Nishat
Mills, Packages, and POL.
The major developments this
•Sui Southern Gas Company (SSGC)
posted after tax earnings of PRs342mn (EPS: PRs0.51) for 1Q06, 2%
•Pakistan Oilfields Limited
(POL) announced 1QFY06 results posting earnings after tax of
PRs1,441mn (EPS PRs10.96) and as expected, POL did not announce any
cash or stock dividend.
•Lucky Cement Line 'C'
(4200tpd) has begun commercial production from this month, which was
initially expected to commence operations from Aug-05. With this
addition, Lucky's production capacity would be increased to 2.7mn tons
of clinker from 1.44mn tons.
•Callmate Telips Telecom
Limited announced 1QFY06 results on Friday posting profits after tax
of PRs221.95mn (EPS: PRs4.02).
•Urea offtake reported 14%
YoY growth in 9M05 (3% YoY in 3Q05; 11% YoY in Sept-05) while DAP
sales registered 21% YoY growth (-7% YoY drop in 3Q05; 13% YoY
•Shell Pakistan posted
earnings after tax of PRs982mn(EPS PRs22.40) as compared to PRs651mn
(EPS: PRs14.85) posted last year, depicting a growth of 51% YoY.
•Nestle Pakistan posted
after tax earnings of PRs845mn (EPS: PRs18.65), 10% YoY higher. ???Cherat
Cement announced its 1QFY06 results. Net earnings were up by 54% YoY
to PRs232mn (EPS: PRs2.79), which is well above market expectations.
•On the back of attractive
valuations, the Karachi stock market attracted an impressive
US$144.9mn in 1QFY06 (compared to US$20mn in 1QFY05). On the other
hand, total Foreign Direct Investment (FDI) was recorded at US$328.7mn
(from US$181.1mn in 1QFY05).
•Maintaining its tradition
of high payouts and bonus dividends, Fauji Fertilizer (FFC) declared
PRs3.25/share cash and 10% bonus dividend along with its 9M05 results.
Net profits for 9M05 were up by 13% YoY to PRs3.49bn (EPS: PRs7.78),
which is 6% higher than our expectations.
•Packages posted net profit
of PRs639mn (EPS: PRs9.14) for 9M05, 18% higher YoY.
•Nishat Mills Ltd. (NML)
announced results for the 1QFY06 yesterday. The company posted after
tax earnings of PRs320mn (EPS: PRs2.2).
•Indus Motor Company
reported 1Q06 posting earnings after tax of PRs466mn (EPS: PRs5.93) as
against PRs368mn (EPS: PRs4.69), 27% higher YoY and 3% lower than our
•ICI Pakistan announced its
9M05 results, posting earnings after tax of 1,160mn (EPS: PRs8.36) up
by 77% YoY (one time gain on sale of PTA excluded) and 8% higher than
THIS WEEK'S TOP STORIES
NESTLE & UNILEVER - 9M05
Nestle Pakistan is scheduled
to announce its 9M05 results on Tuesday, 25-Oct-05. We expect Nestle
to post after tax earnings of PRs886mn (EPS: PRs19.56), 15% higher YoY.
Nestle Pakistan will be a direct beneficiary of additional demand for
packed products (Milk and Water) arising after the earthquake. We
recommend Buy for Nestle with a price objective of PRs685/share.
Unilever Pakistan is due to
announce its 9M05 results on Wednesday, 26-Oct-05. We expect Unilever
to post net earnings of PRs1.38bn (EPS: PRs104.16), 17% YoY drop. The
decline in earnings is attributable to capital gains booked last year.
Going forward we expect Household & Personal Care (HPC) segment to
recover and outperform other segments with the removal of excise duty
on soaps and detergents. We recommend a Neutral stance for Unilever
with a fair value of PRs1,699/share.
PTCL & FFC RESULT PREVIEW
PTCL is to announce 1QFY06
results on Thursday. We expect PTCL to post profit after tax of
PRs4,760mn (EPS: PRs0.93), 24% lower YoY. Dividend speculations will
again be rife and since privatization issues are still unresolved, one
could possibly see an interesting situation where only minority
shareholders are entitled to a dividend of around PRs3.0-3.5/share.
Regarding transfer of management to Etisalat, we firmly believe the
transaction will eventually come through. However, we feel that
Etisalat should not delay the takeover much longer as it is hurting
its own prospects by allowing niche competitors an open ground during
the intermediate period.
NML & DGKC 1QFY06 RESULT
NML is to announce 1QFY06
results today where we expect after tax earnings of PRs392mn (EPS:
PRs2.70) 31% higher YoY, driven by 8% top line growth and 457bp
improvement in gross margins. At 8x FY06E earnings, we recommend a Buy
for Nishat Mills, which trades at a 56% discount to our Sum of Parts
P.O of PRs141.7/sh.
DG Khan Cement (DGKC) is
scheduled to announce its 1QFY06 results tomorrow 27-Oct-2005. We
expect DGKC to report after tax earnings of PRs421mn (EPS: PRs2.28),
49% higher YoY. We are expecting 200bps imrpovement in gross margins.
At current levels, we recommend SELL for DGKC with a revised fair
value of PRs62/share.
MCB & NBP - 3Q05 RESULT