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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 10, 2005

MARKET THIS WEEK

The overall sentiment at the KSE remained positive especially after the last week concluded on a high. The daily volumes hovered around the 500mn figure except for Friday, where the volumes were lower at 383mn. Considerable activity was seen in the top tier stocks after a recent period where the investor interest had shifted towards second and third tier stocks. Activity in the cement and banking sector provided a boost to the market. Overall, the market closed 2.23% higher WoW.

OUTLOOK FOR THE FUTURE

We believe that the market would remain range bound next week and will remain sensitive to news regarding KSE Chairmanship and any directives on the CFS issue. Oil fluctuations will dictate the performance of the oil and gas sector and can influence the market direction. We are selectively positive on the market and recommend investors to go long in Pakistan Oilfields, Fauji Fertilizer Bin Qasim, Nishat Mills, and Azgard Nine. From a dividend yield perspective, KAPCO looks attractive.

FUNDAMENTAL CHANGES

The major developments this week were:

•MOL, an international petroleum company based in Hungary, has expressed its commitment for acquisition of 51% stake of Pakistan Petroleum Limited (PPL).

•The Islamabad Stock Exchange (ISE) has approved the directives of the Securities and Exchange Commission for election of non-member director as the Chairman of the Exchange.

•Speculation over the office of Governor State Bank of Pakistan (SBP) finally ended with the appointment of Dr. Shamshad Akhter. Dr. Akhter is currently serving as Director General South East Asia Department in the Asian Development Bank.

•The Cabinet Committee on Privatization (CCOP) gave its approval to privatization of NIT in its meeting held yesterday and set a deadline of 15-April-06.

•According to news reports, the Kuwaiti National Industries Group has acquired 29% stake in Karachi Electric Supply Corporation (KESC) for US$150mn (PRs2.36/ share for 3.82bn shares).

•The first four months of the current fiscal year have brought cheer for textile exporters, with 28% growth YoY realized over July-October. Textile exports came in at US$3.34bn, as compared to US$2.61bn last year.

•As per newspaper reports, quoting Senior Executive Vice President Pakistan Telecommunication Company (PTCL), Shahzad Sadan and Executive Vice President, Gul Bahadur Khan have announced that not a single permanent employee of the company will be removed from job.

•As per newspaper reports, the new management of KESC has announced that it will invest US$800mn in the entity, to raise power generation capacity.

•State Bank of Pakistan (SBP) scrapped 3M & 6M T-bill auctions, whilst it accepted PRs19.6bn worth of 12M T-bills @ 8.79% (unchanged).

•Securities and Exchange Commission is expected to announce new mechanisms for downward capping of stocks as well as Continuous Funding System (CFS).

•As stated in a press release, issued by the Karachi Stock Exchange (KSE), the stock exchange has decided to take legal opinion on the matter of election of a non-member director as Chairman of the KSE.

•Sui Nothern Gas Pipelines Limited and Sui Southern Gas Company Limited, have sought a PRs26.20/mmbtu increase in gas tariffs, effective from 1-Jan-06.

THIS WEEK'S TOP STORIES

SNGPL & SSGC - ALL SET TO PRIVATIZE!!!

Aiming at privatization of Sui Southern (SSGC) and Sui Northern (SNGPL) in FY06, OGRA is acting aggressively for setting up all benchmarks, which are crucial in determining future profitability outlook of the Sui twins. Latest to come to the fore are new benchmarks for UFG losses and salary expenses, to be followed by the new return formula for the two companies. Based on the new benchmarks, we find SSGC's profits are more vulnerable to UFG (Unaccounted for Gas) targets (14.5% impact on EBIT) 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 (EBIT impact: 13%). Thus at current levels, we prefer SNGPL (Price Obj PRs79) over SSGC (Price Obj PRs28) offering a total return of 20% (inclusive of dividend yield).

PTCL - PRIVATIZATION NEARING COMPLETION?

As per newspaper reports, the PC is reportedly likely to accept most of the demands put forward by Etisalat the more important being lifting of restriction of employees lay off, listing of PTCL on UAE bourses, and transfer of 30% stake of PTCL as opposed to 26% stake initially offered for sale. Our concern on these concessions stem from the fact that these concessions necessitate change in the basic parameters of the pre-bid documents, which can raise concern of Singtel and China Mobile, the other two parties that bid for PTCL. We await concrete developments on the lifting of restriction on lay off of employees before turning positive on the stock, as higher employee compensation remains a major drag on PTCL's earnings. We maintain our Neutral stance on PTCL.

WHERE TO GO WHEN GROWTH SLOWS DOWN

The verdict has come in; earnings growth at the KSE is slowing down. We expect earnings growth of 7.6% in CY06 after 22% growth expected for CY05. This in no way implies, however, that valuable investment opportunities do not exist. We narrow down attractive scrips into four key themes, which we believe, will generate returns superior to the market. At this point in time, we advise investment in Consolidators (expanding industry leaders) like Sui Northern Gas Pipelines, Nishat Mills, Nishat Chunian and Packages; Niche Plays (companies that have identified demand trends accurately) like Fauji Fertilizer Bin Qasim; Overlooked stocks (underperformers and cheap overlooked stocks- we believe they will now perform) like Hubco and Azgard Nine; and Revamped Focus Stories (internal momentum will propel growth) like ICI Pakistan and Pakistan Oilfields.

NBP - CAPITAL GAINS TO BOOST INCOME IN CY06

National Bank of Pakistan's investment in National Investment Trust is likely to be freed up soon after a period of almost five years. With the government aggressively pursuing the privatization of NIT, banks are most likely to be handed over portfolio of stocks equivalent in value to their investment in NIT. While NBP is likely to report a handsome windfall gain in CY06 as a result of NIT's privatization (estimated at PRs21/share), it is unlikely to have any major impact on the valuation of the bank. NBP is already marking to market its investment in NIT, with the gain being recorded as a surplus on revaluation. On privatization, the bank is likely to record a capital gain on its investment as a result of which the revaluation surplus would be transferred to retained earnings of the bank, leaving the book value unchanged. On the other hand, sale of NBP's stake in Bank Al Jazira is likely to result in over PRs20/share (excluding the impact of tax) impact in earnings and book value. However, timing of this sale remains uncertain. On the other hand, the change in Prudential Regulations for provisioning is likely to result in an additional provisioning of PRs1,007mn (PRs1.70/share) by NBP is CY05. Trading at 2.05x FY05E book value, we believe that most of the positives have been discounted, and recommend a Neutral stance on NBP at current levels.

CALLMATE INTERNATIONAL DEBUT: VALUE ADDITIVE

Callmate Telips Telecom Limited (CTTL) has formally launched its international calling cards by initiating operations in three countries (USA, UK and Canada). Targeted at expatriate Pakistanis calling to and from Pakistan, the company remains excited at the prospects and initial response to the product. We prefer to remain conservative in incorporating the impact of the new product and estimate an additional PRs2.9-3.0 per share bottom line impact for FY06. Carrying our conservative forecasts forward, our revised fair value for the stock stands at PRs92 per share offering 21% upside (including dividend yield) at current levels. After a phenomenal run up in price, the stock is taking a breather at current levels as the LDI license driven excitement has settled down. The aforementioned launch may serve as a trigger as return of growth

prospects demands a re-rating of Callmate's multiples. Combined with growth in earnings, interest in the stock may well be re-ignited in the days to come. Go long on Callmate!

MARKET ROUNDUP

 

LAST WEEK

THIS WEEK

% CHANGE

Mkt. Cap (US $ bn)

43.75

45.41

3.79%

Avg. Dly T/O (mn. shares)

397.39

462.98

16.51%

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

566.91

653.44

15.26%

No. of Trading Sessions

5

5

 

KSE 100 Index

9226.41

9431.81

2.23%

KSE ALL Share Index

6172.80

6330.42

2.55%

 
 

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