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  STOCK WATCH

By SHABBIR H. KAZMI
Updated Nov 12, 2005

All banks except United Bank have posted their nine-month results, with some posting above expected results and some posting results inline with the forecasts. Two of the banks that posted above expected earnings were Allied Bank and National Bank. Allied Bank posted above expected results posting profit after tax of Rs2 billion (EPS: Rs 4.61). Advances of the bank in nine months crossed full year forecast of Rs 90 billion. For the full year advances of bank are expected to cross the Rs 100 billion mark. The bank is lending very aggressively as it has a huge deposit base and a low advances to deposits ratio. The revised full year earning forecast for the bank now stands at Rs 2.9 billion (EPS: Rs 6.6).

National Bank posted after tax profit of Rs 8.7 billion (EPS: Rs 14.74) for nine months. This depicts a growth of 107% compared to earnings of Rs 4.2 billion (EPS: Rs 7.11) for the corresponding period last year. This healthy growth was once again due to increase in Net Interest Income of the bank. Analysts have revised their full year expectation of profit to Rs 12.4 billion (EPS: Rs 21) from previous estimate of Rs 10.6 billion (EPS: Rs 18). An interesting point to note is that the bank has continuously been losing its non-remunerative deposits in the last few quarters. National Bank usually sees its deposits decline in the third quarter of the year, but third quarter of 2005 had the dual impact of the seasonal decline in deposits along with the gradual decline of the non-remunerative deposits from financial institutions. Advances of the bank saw a usual slight decline in the quarter, coming down to Rs 245 billion.

The last bank to announce its nine-month results is United Bank, which is due to hold its Board meeting on November 12, 2005. The stock has been lacking volumes at the bourses in the recent past due to its small free float. However, its price has been adjusting itself quite appropriately. According to InvestCap the bank is expected to post profit after tax of Rs 3.56 billion (EPS: Rs 6.9) showing a growth of 122% over nine-month profit of 2004 of Rs 1.6 billion (EPS: Rs 3.1). Profit before tax is expected to grow by 91% from Rs 3 billion to Rs 5.8 billion. The factors behind this 122% growth in profitability are likely to be the drastic increase in the advances portfolio of the bank, together with the increasing spreads of the banking sector. In addition to the general increasing spreads of the banking sector, UBL, in particular has increased its consumer portfolio which has increased the bank's spreads more relative to other banks. Net Interest Income of the bank is expected to have risen by 93% from Rs 4.9 billion to Rs 9.4 billion. This growth is expected to be on the back of growth in advances, which are expected to have grown by 39% from Rs 125 billion to Rs 174 billion. Another core earnings avenue, the fee, commission and brokerage income of the bank is expected to have increased by 20% from Rs 1.15 billion to Rs 1.38 billion. This avenue is linked to the trade of the economy, which has also grown significantly during this period. Advances of the bank are expected to have grown by 19% from Rs 146 billion in December 2004 to Rs 174 billion in September 2005. On the other hand, deposits of the bank are expected to have grown by 18% to Rs 272 billion in September 2005 from Rs 231 billion in December 2004. Advances to deposits ratio has been fairly stable at 64%. For the full year, advances and deposits of the bank are expected to grow by 25% and 22% respectively to Rs 183 billion and Rs 281 billion.

ICI Pakistan has released its nine-month financial results posting Rs 1,160 million profit after tax (EPS: Rs 8.36). Gross profit of the company was up 20% at Rs 2,361 million against Rs 1,964 million for the same period last year. Gross margin improved by 215bps and was recorded at 16.9%. Improved gross profits, reduction in administrative expenses and only a slight increase in selling and marketing costs helped in boosting operating profits, which rose by 41% to Rs 1,284 million from Rs 910 million last year. Higher operating income and reduced financial charges (down 46%) due to retirement of the company's long-term debt helped in boosting the bottom line by 77%. Local demand for Soda Ash remained robust during the nine months, and volumes increased by 3% to 183,789 tons. Sales volume of Sodium bicarbonate also showed robust growth and went up by 14% to 12,110 tons. This business had earlier been threatened by cheap imports from China, but rising demand because of economic growth has turned the market dynamics once again in favor of ICI Pakistan. Operating income for the segment was recorded at Rs 444 million. The Paints business continued to show robust performance as sales volume grew by 19%. However margins came under pressure due to higher input costs, which were partially offset by an increase in the selling price. The segment's operating income showed marginal growth and was recorded at Rs 390.8 million. PSF prices were increased during the third quarter due to rising raw material cost. Demand for polyester fiber also improved over the previous quarter as blend ratios moved in favor of polyester. Sales volume for the nine months was marginally lower compared to last year at 30,833 tons. With higher prices prevailing in the market, net income for the period were significantly higher, whereby operating income registered a 31% growth and was recorded at Rs 175.4 million.

Despite Ramadan and fast approaching winter, cement sales remained robust in October, going up to 1.44 million tons compared to 1.19 million tons during October 2004. This indicates a growth of approximately 20%. As against this exports declines by slightly more than 13% to 123,000 tons compared to 142,000 tons. On the whole during October the industry posted total sales of 1.56 million tons as against 1.34 million tons for October 2004, posting 16.35% growth. Sale during July-October went up by 11% to 6.03 million tons from 5.43 million tons. Local sales registered impressive growth of 13% to touch 5.48 million tones compared to 4.86 million tones during the corresponding period last year. However, exports came down from 587,000 tons 554,000 tons due to robust domestic demand.

 
 

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