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)



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 10, 2005

It is getting visible that earnings growth at the KSE is slowing down. However, this in no way implies that valuable investment opportunities do not exist. The investors have to make prudent decisions by picking up companies offering growth potential. They have to consolidate their position by picking up those scrips, which offer the largest potential. They also have to diversify their portfolio by including those which were overlooked in the past.

Cement sales are up 11% at 7.229 million tons (domestic sales at 6.578 million tons and exports at 651,000 tons). Capacity utilization for November is estimated at 75% based on revised installed production capacity (after incorporating Lucky's new line of 4,200tpd and de-bottlenecking by D. G. Khan, Maple Leaf and Pioneer). Monthly sales have dropped 19% compared to October, but this is not surprising as construction activity tapers off in winter. Some rehabilitation work is in progress in the earthquake hit areas, but much of the temporary housing provided to the survivors consists of tents and temporary shelters made of tin sheets. Any major reconstruction work is expected to begin once the cold weather subsides and the snow melts, resulting in incremental demand for cement from April onwards. Meanwhile demand fundamentals are intact because of real estate prices sky rocketing resulting in demand for apartment blocks, plus ongoing public infrastructure projects.

Keeping in view privatization of SSGC and SNGPL, OGRA is considering setting up various benchmarks, which are crucial in determining future profitability outlook of the Sui twins. The new benchmarks for Unaccounted for gas losses (UFG) and salary expenses, to be followed by the new return formula for the two companies. Based on the new benchmarks, SSGC's profits are more vulnerable to UFG targets, while the company is sitting comfortable on lower-than-allowed salaries expenses. SNGPL though appears above both benchmarks, still has a lower impact on EBIT than SSGC. According to the international benchmarks of 2-3% for UFG and the constraints in the domestic environment, OGRA has set upper and lower limits of UFG for a period of 7 years targeting UFG to reach 4% by 2011-12. Based on the new decision, if the actual UFG is above the upper limit, the entire amount would be subtracted from the total return on assets (ROA) under the fixed return formula for gas distribution companies. If it is in between the upper and lower limit, the company would need to bear 50% of the losses and 50% would be borne by the government. Similarly, if the actual UFG is below the lower limit, then there would not be any reduction in determining the total ROA. The UFG targets set by OGRA are a bit difficult to be achieved. Despite best efforts of both the companies, the targets are not likely to be met due to 1) increased city load; 2) increase in general industries, CNG stations and household customers' base; 3) Ageing pipes and meters; 4) reduction in the share of power sector and 5) greater consumer awareness and technological advancement in gas theft techniques. Impact of UFG as a percentage of EBIT would be higher for SSGC than SNGPL owing to 1) higher volumes of UFG and 2) higher input cost of gas fields located in Sindh. OGRA has also determined, on 2-years trailing basis from 2006, a benchmark for salary expenses (exclusive of staff benefits). As per the new benchmark, the percentage increase in salary expense would take into consideration: 1) CPI inflation, 2) growth in number of customers, 3) growth in T&D network and 4) volumetric growth in gas sales. Keeping these benchmarks in view SSGC appears comfortable at levels lower than benchmark while SNGPL is expected to breach the benchmark. The next step for OGRA, prior to privatization, would be to decide on the new return formula for SSGC and SNGPL. The existing foreign currency loans for SSGC are expiring this year and it is unlikely that the government would be able attract new investors without a clear indication about the future profitability outlook for the companies.

Attock Petroleum has made a fantastic start with first quarter results depicting earnings growth of 192%. High earnings growth is primarily attributable to strong top line growth. NRL accounted for over 33% of APL's product supply, allowing the company to make significant strides in the FO and LDO markets. The company also started direct supply of JP-8 which contributed 14% to revenues while FO contributed over one billion rupees in revenue. Going forward analysts expect growth momentum to continue as supplies from NRL could allow APL to expand in the South of the country where it has limited presence. Compared to listed peers PSO and Shell, APL's earnings growth has come on the back of strong volume sales rather than domestic oil price hike. Attock Oil group's acquisition of National Refinery has provided synergies for APL as APL has adequate product supply to expand operations. During first four months APL has managed to increase its market share in the FO and LDO market. The company also started direct export of JP-8, which contributed 14% to top line during the first quarter. Overall top line for the company grew by 252% and was the major trigger to earnings growth.

Maple Leaf's major expansion plan involves establishment of a new production plant with an annual capacity of approximately two million tons of grey cement. Total cost of the plant, has been estimated at Rs 10.225 billion, owing to several factors including higher prices of steel, higher interest charges, devaluation of Pak Rupee against the Euro and greater power generation requirements. The company is taking additional loans of approximately Rs 1.88 billion to finance the additional cost. The new plant is expected to commence production from January 2007. After expansion, Maple Leaf's total capacity will increase to over 3.7 million tons out of which 3.2 million would be on dry process. The optimization of the current dry process line has already been completed, which has enhanced the production capacity from 3300 tpd to 4000 tpd.


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