KAPCO & HUBCO - 1H/FY07 RESULTS REVIEW...

HETTISH KARMANI, Research Analyst, 
Atlas Capital Markets (Pvt.) Ltd

Feb 26 - Mar 04, 2007

KAPCO EARNINGS DOWN BY 42%...

KAPCO announced its 1H/FY07 results on 16th of this month. This was the third quarter after expiry of its tax exemption period hence resulting in a heavy decline of 42%. Turnover for the period was up by 19% to PRs17.4bn as against PRs14.61bn in the same period last year. Rising cost of fuel led to a surge in the cost component by 35% to PRs13.39bn (Gross Margin: 23%) earlier being PRs9.92bn (Gross Margin: 32%). Other income generated through return on bank deposits and sell off of property was down by 32% to PRs193m. Decline in financial charges and operating expenses failed to provide support to declining profits. Taxation of its income further suppressed the earnings resulting in a 42% decline to PRs2.32bn (EPS: PRs2.64) last year being PRs4.02bn (EPS: PRs4.56). Payout ratio although more during 1H/FY07 was less in absolute terms at PRs3/share. KAPCO announced earlier that it is seriously considering a 0.4-0.5GW expansion. The project would be a dual fuel generation plant, capable of running on both gas and furnace oil. The company has already received approval from the PPIB to go ahead with the expansion. After finalization of tariffs, financial close of the project would most likely be completed by the end of current calendar year. The estimated time period for the construction of the plant would be not less than three year.

HUBCO EARNINGS DOWN BY A PERCENT...

HUBCO announced its 1H/FY07 results earlier during the month. Company reported more than 100% rise in sales to the tune of PRs19.7bn, however, the rising cost of doing business mainly because of 164% jump in fuel prices raised the operating cost by 134% on the whole to PRs17.74bn, last year being PRs7.67bn. As a result, gross profit declined by 6% to PRs1.98bn (Gross Margins: 10%) last year being PRs2.10bn (Gross Margins: 22%). Decline in selling and administration expense and financial charges failed to support the declining earnings. Other Income added to the misery registering a decline of 29% to PRs108m. Earnings therefore declined marginally by a percent to PRs1.24bn (EPS: PRs1.08) as against PRs1.26bn (EPS: PRs1.09) last year in 1H/FY06. The payout of PRs1.25/share was same as last year. The management of the company promises to continue its initiatives towards expansion in the energy sector. The company is considering number of energy projects, realization of any would potentially warrant a changing scenario altogether for the company. Hubco isn't planning any capacity expansion at its own site. Instead it pre-qualified to participate in the bidding for three power projects in Uch 2, Faisalabad and Lahore. The company is also interested in privatization of Sui Southern Gas Company Limited.

(PRs m)

HUBCO

KAPCO

(July - Dec)

1H/FY06

1H/FY07

%

1H/FY06

1H/FY07

%

Sales Revenue

9 ,779

1 9,727

102%

14,615

17,410

19%

COGS

7 ,671

1 7,744

131%

9,924

13,393

35%

Gross profit

2,108

1,983

-6%

4,692

4,017

-14%

S&A Expense

1 71

1 32

-23%

140

106

-24%

Other Income

1 48

1 08

-27%

284

193

-32%

Operating Profit

2,085

1,959

-6%

4,836

4,103

-15%

Fin. Charges

8 18

7 11

-13%

771

629

-18%

Taxation

-

-

-

48

1,153

2303%

PAT

1,267

1,248

-1%

4,017

2,321

-42%

EPS (PRs)

1.09

1.08

-1%

4.56

2.64

-42%

DPS (PRs)

1.25

1.25

 

4.00

3.00

 

GOING FORWARD...

For FY07, we expect KAPCO and HUBCO to report EPS of PRs6.11 and PRs2.45 along with a full year dividend payout of PRs6/Share and PRs2.75/Share respectively. Recently the share price of both the company's has risen significantly hence caution is advised at current levels.

INDEPENDENT POWER PLANTS:

COMPANY

CAPACITY

TECHNOLOGY

PLANT CONFIGU-
RATION

POWER PURCHA-
SER

FUEL SUPP-
LIER

TERM OF THE PPA

INITIAL DEPEN-
DABLE CAPACITY

AES Lalpir Limited

362 MW (Gross)

Oil-Fired Steam Turbine

1x362 MW steam turbine

WAPDA

PSO

30 Years

351.3 MW

AES Pak Gen (Private) Company

365 MW (Gross)

Oil-Fired Stream Turbine

1x362 MW steam turbine

WAPDA

PSO

30 Years

343.9 MW

Altern Energy Limited

10.5 MW (Gross)

Gas Fired Diesel Engine

3x3.5 MW Engines

WAPDA

OGDC

30 Years

9.75 MW (Net)

DHA Cogen Ltd.

94 MW

-

-

-

-

-

-

Fauji Kabirwala Power Company

Limited

157 MW

Combined Cycle + Steam Turbines

2 Gas Turbines of 48.4 MW each and a Steam Turbine of capacity 59.4 MW

WAPDA

 

OGDC

30 Years

150 MW

Gul Ahmed Energy

136.2 MW (Gross)

Diesel Engine

9 Oil Fired Engines

KESC

PSO

22 Years

125 MW

Habibullah Coastal Power (Pvt.) Company

140 MW (Gross)

Combined Cycle

3 Gas Turbines + 1 Steam Turbines

WAPDA

SSGC

30 Years

126 MW

Japan Power Generation

120 MW (Gross)

Diesel Engines

24 Oil Fired Units

WAPDA

PSO

30 Years

107 MW

Kohinoor Energy Limited

131.4 MW (Gross)

Diesel Engines

8 Diesel Generator Sets each of 15.68 MW and a Steam Turbine Generating Set of 6.0 MW at alternator Terminal

WAPDA

PSO

22 Years

126 MW

Kot Addu Power Co. Ltd

1616.36 MW

-

-

-

-

-

-

Liberty Power Limited

235 MW (Gross)

Combined Cycle

One Gas Turbine + One Steam Turbine + One Heat Recovery Steam Generator

WAPDA

SNGPL

25 Years

210.463 MW

New Park Energy Ltd.

45 MW

-

-

-

-

-

-

Orient Company Pvt. Ltd

225 MW

-

-

-

-

-

-

Rousch (Pakistan) Power Limited

412 MW (Gross)

Combined Cycle

Two Gas Turbines + One Steam Turbine

WAPDA

PSO

30 Years

355 MW

Saba Power Company

125 MW (Gross)

Steam Turbines

One Furnace Oil Fired Unit

WAPDA

PSO

30 Years

122.57 MW (119.57 as per the Revised MOU)

Southern Electric Power Project

115.2 MW (Gross)

Diesel Engines

5 Units

WAPDA

PSO

30 Years

112.1 MW

Star Power Company Pvt. Ltd.

133.515 MW

-

-

-

-

-

-

Tapal Energy (Pvt.) Limited

126 MW (Gross)

Diesel Engines

12 Oil Fired Engines

KESC

PSO

22 Years

119.5 MW

Uch Power Limited

586 MW (Gross)

Combined Cycle

3 Gas Turbines + 1 Steam Turbine

WAPDA

OGDC

30 Years

548 MW

Hub Power Company

1292 MW (Gross)

Oil Fired, Steam Turbines

4x323 MW Steam Turbines

WAPDA

PSO

30 Years

1299 MW

Tapal Energy Ltd and Gul Ahmed Energy Ltd. are supplying power to KESC while the remaining 12 IPPs and Hubco are supplying power to WAPDA.
Source: Private Power and Infrastructure Board