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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 Nov 19, 2005

MARKET THIS WEEK

The market closed 1.59% higher WoW. With no concrete development on the PTCL-Etisalat issue so far, fortunes of the market continue to swing with rumors regarding the deal. Consequently, investor interest has shifted to the second and third tier scrips, and higher volumes have been seen in this category. Uncertainty regarding PTCL's deal and the approaching future contract expiry has made investors cautious. Cement sector and ICI continued to outperform the market on the back of exceptional earnings growth expectations.

OUTLOOK FOR THE FUTURE

Investors would be eyeing the outcome of today's "Donors' Conference" seeking US$5.2bn aid from the international communities for rebuilding the earthquake-affected area. Any Positive response from the international community is expected to fuel macro economic activity in the country and is likely to be taken as a positive signal by the market. Honda Atlas is expected to announce its 1H06 results on 21-Nov-2005; any positive surprises could be a possible trigger for the stock performance. We do not expect any outcome on PTCL transaction next week, which is expected to limit the stock performance. We remain bullish on POL, SNGPL, FFBL, KAPCO, ICI, Packages, NML, NCL and Azgard Nine.

FUNDAMENTAL CHANGES

The major developments this week were:

•Surprisingly, inflation was recorded at 8.27% in Oct-05 (from 8.53% in Sep-05). The major surprise came from food inflation, which was recorded at 6.4% (from 7.5% in Sep-05), whilst fuel and transport inflation were recorded at 7.6% (from 6.9%) and 22.7% (from 20.7% month earlier).

•As expected, Oil Companies Advisory Committee (OCAC) has kept domestic oil prices unchanged. Ex-refinery prices of Mogas and Kerosene have declined considerably and are low by 5% and 12% respectively in the current fortnight.

•As per a news item quoting Privatization Commission official, the privatization of Pakistan State Oil has entered an advanced stage as the PC has slated meetings with potential buyers from Monday onwards. Given the status of privatization process, we believe the deal would be completed in 2QCY06.

•The link between Hub Power Company and Karachi Electric Supply Corporation (KESC) is likely to be completed by April-06, instead of the earlier expected date of July-06.

•The privatization of Karachi Electric Supply Corporation (KESC) is nearing its logical conclusion, with the consortium of Hasan Associates confirming the payment of first installment of US$100mn for the transaction. Issuance of a Letter of Acceptance by the Privatization Commission (PC) and signing of the Share Purchase Agreement will follow this.

•The third round of talks between Etisalat and the Government of Pakistan has also ended without a final conclusion. The five-member Etisalat team has left for the UAE to seek guidance from top management for further negotiations.

•Trade account deficit was recorded at US$3.37bn (+161% YoY) in the first four month of current fiscal year as compared to US$1.29bn during the same period last year.

•As per newspaper reports, Millicom International is likely to sell its stake in AMPS based cellular brand Instaphone to its local partners, Arfeen Group.

•Sui Southern Gas Company (SSGC) has begun laying a 42-inch diameter pipeline in Bin Qasim.

The project is expected to cost PRs800mn with a designed capacity of 220mmcfd target to industrial consumers.

•Pakistan and Iran have reiterated their commitment to the transnational gas pipeline project in the fourth meeting of Iran-Pakistan Joint Working Group (JWG).

THIS WEEK'S TOP STORIES

DGKC - FAIR VALUE UPGRADE; NEUTRAL

We are upgrading our fair value for DGKC to PRs89.25/share (SOP based) from PRs62/share (DCF based).

We are not ruling out the possibility of rights issue since the company has the option to 1) issue rights or 2) partially divest its investment in associated companies (MCB, NCL and NML) to finance its expansion plan expected to cost around PRs12bn (40% equity portion). DGKC has also shown interest in acquiring Galadari Cement (2,700-3,000tpd). Hold DGKC.

FFBL'S BOD APPROVES BMR OF DAP PLANT; BUY

Fauji Fertilizer Bin Qasim (FFBL) has recently released its 3Q05 report. The Board of Directors has approved expansion of its DAP plant which is expected to increase its capacity by 63% in 2007. The expansion plan is scheduled to be completed in line with the company's revamping plan for the ammonia plant in Mar-2007.

We have already incorporated this addition in our estimates for FFBL, which will result in 32% YoY growth in FFBL's earnings in 2007 and 16% 5-year earnings CAGR. This is coupled with a positive outlook on global DAP prices. We reiterate our Buy recommendation for FFBL with a DCF-based price objective of PRs47.90/share.

YET ANOTHER PSF PRICE ROLLOVER

For the fifth month running now, domestic PSF manufacturers have been unable to raise prices. Meanwhile, despite a nearly 6% decline in crude oil prices over the last 2 weeks, PTA and MEG prices have not budged and are actually up over the last 3 months. According to our regional petrochemical analyst at Merrill Lynch, at the heart of this issue is a delay in Naphtha cracking capacity additions in Iran, bringing down global Ethylene capacity. Following China's textile deal with the US, PSF utilization rates will pick up resulting in reinforced demand for both PTA and MEG. With the delays in supply addition, it is unlikely that feedstock prices will soften in the near future. This brings about a slowdown in our expected recovery for Dewan Salman Fibres. The deciding factor in the PSF tussle will be China, where strong enough PSF demand could bring in a price recovery.

ICI PAKISTAN: BUY FOR UPGRADE!

We re-iterate our buy on ICI Pakistan with a revised DCF based price objective of PRs161/share. The company's earnings after tax grew from PRs656mn (EPS: PRs4.72) to PRs1,160mn (EPS:PRs8.36) during 9M05, 77% higher YoY. The jump in earnings was spurred by robust demand growth for all the business segments and the management's cost centric focus, which reduced operational costs. The stock is trading at a 40% discount to its 3-year relative P/E multiple of 1.33x and our price objective signifies a 25% upside from current levels. Buy ICI! We have also released a comment titled "ICI Pakistan: Buy on Turnaround Potential," through Merrill Lynch.

DONOR CONFERENCE ON 19TH - PAKISTAN HOPES FOR THE BEST!

Mounting current account deficit and depleting foreign exchange reserves have already raised a lot of question on Pakistan's ability to meet its future external account obligations. Initially, we were of the opinion that utilization of privatization proceeds of PTCL would provide the cushion for external account imbalances. So far, the delay of PTCL privatization outcome has not totally reflected in Pakistan's exchange rate stability, owing to the persistent inflow of non-debt generating funds into the system. To top it off, we expect Pakistan to receive additional US$5.0bn in near to medium term, as President Musharraf has called the International Donor's Conference on Nov 19th to seek the help of international communities in rebuilding the earthquakeaffected area. This would not only provide a sigh of relief to Pakistan's external account imbalances, it would also provide stimulus to manufacturing and services sector in medium term, as World Bank estimates that Pakistan would require US$5.2bn to effectively implement a relief, recovery and reconstruction strategy in the wake of last month's devastating earthquake. In sum, we believe macro economic fundamentals are intact.

MARKET ROUNDUP

 

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

41.74

42.64

2.16%

Avg. Dly T/O (mn. shares)

453.51

412.66

-9.01%

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

731.22

462.88

-36.70%

No. of Trading Sessions

4

5

18

KSE 100 Index

8793.93

8933.51

1.59%

KSE ALL Share Index

5858.11

5953.98

1.64%

 
 

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