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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 Dec 03, 2005

MARKET THIS WEEK

While expectations of a range bound market in the absence of any significant short term trigger did hold true for the first four days of the week, the last day was an exception with the index registering a substantial 1.6% increase to round off the week at 9,226.41, 1.79% higher WoW. Increase in international oil prices on Thursday and renewed round of accumulation in PTCL by punters were cited as the major reasons driving the rally. The much talked about issue between SECP and KSE over nomination of a non-broker Chairman of the exchange reflected in the index only on an intra-day basis, taking it below the 9,000 mark during the day but closing above 9,000 throughout the week.

OUTLOOK FOR THE FUTURE

The market will again be 'looking' for triggers in the forthcoming week. The SECP-KSE issue is a potential sentiment driver in the next week with none of parties thus far willing to take a backward step. The dormant issue of PTCL could raise its head with some newspaper reports suggesting that the issue might have touched its boiling point and something will give in the next few days. Any positive (or negative) development over the issue of Kalabagh dam, could also be a key trigger/ dampener for the cement sector during the next week. Irrespective of these issues, the market remains in an uncertain state with market participants unsure of a direction. Sticking to stocks backed by strong fundamentals remains our preferred route in the market. We recommend investors to go long in Pakistan Oilfields, Fauji Fertilizer Bin Qasim, Nishat Mills, ICI Pakistan and Azgard Nine. From a dividend yield perspective, KAPCO looks attractive.

FUNDAMENTAL CHANGES

The major developments this week were:

•The Oil Companies Advisory Committee (OCAC) has maintained domestic oil prices for another fortnight in the review conducted on Wednesday.

•Another round of technical and political discussions for construction of dams in Pakistan was undertaken.

•Karachi Electric Supply Corporation was handed over to the new owners, consortium of Hasan Associates and Aljomaih Group.

•Privatization Minister Hafeez Sheikh has reiterated that the talks are in final stage and a result should be forthcoming in the next few days.

•Central Board of Revenue (CBR) revenue collection fell short of PRs48.8bn target by 12% coming in at PRs42.9bn in Nov-05.

•The government has asked existing Independent Power Producers (IPPs) to increase their installed generation capacity. The government is looking for an increase of 1,300-1,400MW in the installed capacity of existing IPPs to cover the deficit in electricity generation capacity, expected to hit the country in 2007-08.

•Pakistan's textile exports to the EU have dropped by 16.3% since the inception of free trade under the WTO. We do not find this situation overly alarming. A number of factors have contributed to this, particularly the 40% swell of Chinese exports to the region and the price decline of textile products on the back of competition and 2004-05 cheap cotton crop. With Chinese export growth to the EU capped at between 8.5% and 12% since Jul-05 and somewhat firmer cotton prices in play, we expect the situation to rectify.

•Mobile Number Portability (MNP) is proposed for implementation by April 2006. Under the MNP facility, cellular subscribers can switch service providers while retaining their original number.

•The import of old and used vehicles under the Gift Scheme, Transfer of Residence Scheme and Personal Baggage Scheme has gained momentum and a phenomenal growth of 369% (YoY) was witnessed in the first four months July-October.

THIS WEEK'S TOP STORIES

UREA OFFTAKE - OUTPACED EXPECTATIONS

Heading towards the year-end, fertilizer industry is indicating buoyant growth in urea as well as DAP offtake where the industry has reported 17% YoY growth in urea and 15% YoY growth in DAP offtake during Jan'05- Oct'05. This incremental growth (met through imports) in urea offtake at this juncture of time does not have a major impact on existing fertilizer companies, however this carries a positive message for a company eyeing a million ton supply demand deficit by 2010-2011, making the outlook for setting up a new plant expansion more attractive. We do not expect any further revision in urea prices during the remaining part of 2005 whereas we expect up-cycle in DAP prices to continue. We maintain our liking for FFBL (for 26% upside to our Target Price of PRs47.90) and Engro (for positive outlook on a new urea plant).

EXTERNAL DEBT TO GDP- DECLINING!

The stock of External Debt and Liabilities (EDL) witnessed a marginal decline in the first quarter of current fiscal year. We believe the decline in external debt is primarily attributed to the revaluation, as US$ appreciated 2.34% against Japanese Yen and 0.61% against Euro (in year to Sept 30th). Pakistan's major external debts are denominated in Euro, Japanese Yen and US Dollar. As per State Bank of Pakistan (SBP), Pakistan's total External debt and Liabilities were recorded at US$35.67bn as of 1QFY06 (from US$35.83bn on Jun-05). With the decline in external debts, we believe that the share of expensive debt is also declining and the maturity profile of outstanding debt has also improved as Pakistan has received long-term loans, on concessional terms. We expect external debt to increase in 2HFY06 as international multilateral organizations have pledged over US$3.9bn for reconstruction and rehabilitation for those affected by earthquake in Azad Kashmir and NWFP. However, with the improvement in nominal GDP, we expect Pakistan's external debt to GDP to decline to 31% in FY05 (from 32.7% in FY05).

BED LINEN MAKES A CASE: BUY NML

Details of Pakistan's bed linen exports to the US since January this year serve to reinforce our bullish view on Nishat Mills Ltd. Nine months numbers reveal that exports in this category are on an upward trajectory, having grown by 81% in value since the start of the year. Somewhat surprising for a bit player, Pakistan's exports in this segment far outpace those of key competitors, India and China. In the past, the EU's anti dumping duty on Pakistani bed linen effectively corked export growth in that direction. Now with a 320bp reduction in that duty (490bp for NML), an incremental growth avenue has opened up.

Bed linen is something Nishat Mills does well, really well. With 35% of sales coming in through bed wear; a strong presence in the growing US market and a 730bp reduction in duty on EU bound bed wear come January, will serve the company well. We reiterate Buy for NML at our SOP based price Objective of PRs141.70/ share).

POL- EARNINGS REVISED DOWN; VALUATION INTACT

We are revising our earnings forecast for Pakistan Oilfields Limited by PRs2.6 (from PRs47.9 to PRs45.3, 6% downward revision) for FY06 in light of our recent meeting with the management. The revision came as a result of (1) fine tuning of production numbers to reflect expected delay in commencement of production and (2) 20% upward revision in exploration cost estimates. We estimate around 1,800bopd and 3-4MMCFD of oil and gas production would be delayed by 2-3 months. We are also revising POL price objective (PO) by a marginal PRs1.7 to PRs472. As we have already assumed lower oil prices, recent weakening in international oil prices has not affected our earnings estimates or PO. With a potential 22% upside at current levels (price appreciation plus 3.7% dividend yield), we continue to recommend a BUY on POL.

DEVELOPMENT SPENDING FUELS BUDGET DEFICIT!

Budget deficit in 1QFY06 stood at 0.5% of GDP (compared to 0.4% in 1QFY05). Higher deficit is primarily driven by development expenditure (PSDP), recorded at PRs50.58bn (PRs32bn in 1QFY05). We believe the budget deficit will widen in 2QFY06 as government is expected to provide funds to earthquake victims. So far, GoP has announced PRs80bn for relief and reconstruction. With US$6.1bn in international aid committed, we rule out the reallocation of PSDP expenditure from development projects to reconstruction and rehabilitation. We expect the government to continue its ongoing mega development projects and poverty reduction plans. In concurrence with Merrill Lynch's strategy note on Pakistan, we highlight the power sector, transport and communication, water system and rural infrastructure as key areas for spending. Revenue collection (PRs236.57bn) met 1QYF06 target and current expenditure (PRs219.8bn) was managed within the budget. We expect budget deficit to widen marginally to 4.0-4.2% in FY06 as against the full year target of 3.8%.

MARKET ROUNDUP

 

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

43.42

43.75

0.76%

Avg. Dly T/O (mn. shares)

424.16

397.39

-6.31%

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

596.17

566.91

-4.91%

No. of Trading Sessions

5

5

-

KSE 100 Index

9064.39

9226.41

1.79%

KSE ALL Share Index

6049.46

6172.80

2.04%

 
 

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