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Last updated: Friday 23 Dec, 2005-12.30 P.M (PST)



In oC




Today 12 26 38 Sunny
Tomorrow 11 27 38 Sunny
Day after 11 28 38 Sunny
Today 1 20 87 Sunny
Tomorrow 2 20 87 Sunny
Day after 2 21 87 Sunny
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




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







Updated Dec 03, 2005

On the face value one fails to understand the latest point of confrontation between the brokers' fraternity and the regulators on the election of Chairman KSE. However, those who could read in between the lines that the SECP suggestion is noting but to strip off the brokers' community from whatever power they believe to enjoy. As the law stands, on the 10-member board of the KSE, five are elected by the brokers, four are technocrats including the managing director, approved by the SECP and the tenth member is the chairman. In case of an equality of votes (on any controversial issue), the chairman of the (board) meeting shall have a second or casting vote. Knowledgeable brokers fear that if the regulator wrests the authority of appointment of chairman from the brokers, the stock exchanges would be left powerless. According to informed sources, the proposed change could not be made through a directive but has to be made through amendment in the Articles of Association of the Stock Exchange. To do so, a process has to be followed, whereby the Board first proposes a special resolution in its meeting, which is required to be passed by three-fourth of the members present at a general body meeting. And finally to effect an amendment in the articles of association a 21-day notice must be given to the members. Since the date of election of directors falls on December 15, there was not enough time to bring about the change at least this year. It looks like the issue would finally boil down to the question whether or not a directive by the regulator supersedes the Articles of Association of the Exchange?

While any concrete development regarding the Pakistan Telecommunication

Company (PTCL) transaction does not seem to be in sight, optimistic statements from government officials continue intermittently. The latest in line is the statement from Dr. Abdul Hafeez Sheikh, Minister for Privatization and Investment, who has reiterated that the talks are in final stage and a result should be forthcoming in the next few days. Analysts are of the view that the transaction is heading towards its logical conclusion but the timeline and the concessions that Etisalat is able to extract at the end of the day remain to be seen. On the operational front, PTCL has launched a new marketing campaign under the banner "Cities of the Month" in which rates for NWD calls have been slashed. The decline in rates is somewhat expected given the competition PTCL is facing from LDI operators.

The auto sector has been in limelight since July this year, supported by an ongoing boom in auto demand, expansions, and relatively low PE multiples. The sector underperformed in the last month. Despite the share price growth seen to date, there is still value in the sector. The four listed auto assemblers (Honda Atlas, Indus Motor, Pak Suzuki and Dewan Motors) are currently trading at an average PER of 7x. Auto companies have historically traded at a lower PER than the market, but given that the sector is in a growth phase with major capacity expansions ongoing, combined with the fact that auto assemblers have little to no leverage. Expansions will drive revenue growth, and earnings will be supplemented with increased imports, especially of high-end cars, where margins are higher than for locally assembled cars. Aside from growth, Indus offers a healthy dividend yield of 8% while Suzuki is trading at the lowest PER of 5x (to estimated year 2006 earnings).

On Thursday 73 percent shares of KESC along with management control was transferred to the consortium of Saudi investors' group Al-Jumaih and Hasan Associates. Privatization Minister, Dr. Abdul Hafeez conceded that the transaction was difficult but the involvement of the government at the "top level" made it a success. He was confident that the new management would make KESC a public service utility and a profitable entity. Sheikh Abdul Aziz of Al Jumaih on the occasion promised to make KESC a service organization that would be responsive as well as responsible. Frank Scherschmidt in his speech hinted at upgrading and expansion of the KESC system and services in future. Farooq Hasan of Hasan Associates made it clear that there was "absolutely no room for failure" and it had to be only success and nothing else. He recalled that KESC was the first utility company to be registered in 1910 under the Company Act, 1913 and started operations with a generation of 60 megawatt.

The long awaited merger between PICIC and PICIC Commercial Bank appears to be going ahead with the announcement this week of a swap ratio. The notice sent by the two companies to the KSE proposes amalgamation of PCBL into PICIC, with a swap ratio of 1.87 shares of PCBL for each share of PICIC. The swap ratio is after inclusion of 20% bonus shares by PICIC, which will be issued in December 19th, 2005. PICIC has total assets of Rs 37 billion, and equity of Rs 8.7 billion, as of 30th September 2005. Its book value per share is Rs 23.12, and it is currently trading at Rs 87.25 per share. Commercial bank has total assets of Rs 62 billion and equity of R3.9 billion. Its book value per share as of end September was Rs 17.12 it is being traded at Rs 40.35 per share. PICIC owns 60% of Bank's shares (109.395 million shares), recorded at historic cost of Rs 1.437 billion, which will effectively be cancelled after the merger. The combined balance sheet will have total assets of approx. Rs 97.75 billion and equity of Rs 11.2 billion. On a post-merger 426 million shares outstanding, the book value per share for the merged company would be Rs 26.6 per share (this is an estimate as part of the merger process will include revaluation of fixed assets to reflect current market value, plus income and balance sheet changes since end September). Combined nine-month earnings for PICIC and Bank are Rs 2.43 billion, and the company is currently trading at a PER of 9.55 to annualized earnings.

In the absence of expected production enhancement through development and commencement from some of POL announced field plans, it is necessary to revisit the company. On production front, recent calamity, weather conditions and some technical problems have led to delay in addition of production from both POL operated and joint venture fields. Collectively a delay of 2-3 months in the addition of 1,800bpd oil and 3-4MMCFD gas production respectively is feared. The major delay is expected from various fields. The management expects completion of drilling work on new well Pindori-VI to prolong to end January due to some technical problems. Pindori-VI was expected to add 2,000bpd (POL share: 700bpd) and 5MMCFD of gas (POL Share: 1.75MMCFD) in November. The second discovery at Tal block was expected to come online with a total production of 5,000bpd (POL share: 1,050bpd) and 5MMCFD (POL share: 1.05MMCFD) of gas in January, which has now been delayed up to end January.


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