TMCnet News
STOCK MARKET AT A GLANCE(Pakistan & Gulf Economist Via Acquire Media NewsEdge) MARKET THIS WEEK The law and order situation stole the headlines in a chaotic week cut short by an additional holiday on Friday. The benchmark index alternated between the green and red but ultimately ended the week flat (+0.1% WoW). Cumulative foreign inflows in the four trading sessions were recorded at US$0.99mn versus US$4.8mn outflow in the comparable period last week. Volumes declined by 8% on low investor participation however value traded marginally increased by 2%. For corporate results, the short week was a mixed one with Indus (EPS: PRs34.9; DPS: PRs10.0) and LOTPTA (EPS: PRs0.8) both reporting above-expected set of numbers. Packages, on the other hand reported a dismal LPS of PRs3.97 plagued by higher raw material prices and increased finance costs. From a macroeconomic perspective, news flow suggested that the base year for price index calculations was being altered along with the weight-ages of certain components, although clarity on the same is yet to emerge. OUTLOOK FOR THE FUTURE The upcoming week will mark the culmination of the holy month of Ramadan and the advent of Eid break. From a market view point, the week will see only two trading sessions and since no major corporate result announcement is due, the market may portray a deserted look with low liquidity. Over the next few days, the market is likely to keenly watch political developments related to possible rejoining of MQM in the Center and Sindh governments. This may pave the way for a sustainable improvement in the security situation in Karachi. Our investment case remains a cherry picking one and we suggest investors to take exposure in companies with sound fundamentals and robust business models. With this in mind, we recommend an accumulation stance on PPL, APL, PSO, OGDC, POL and Kapco in the energy chain. Other names on our preferred list include Engro Corp, FFC, PTCL and Lucky Cement where a blend of inexpensive valuations and double-digit dividend yields have opened up pockets of opportunity. NEWS THIS WEEK TEXTILE EXPORTS DOWN BY 15.3% MOM IN JUL-11: As per data released by FBS, textile exports declined by 15.3% to US$1.12bn in Jul-11 against US$1.3bn in the previous month, but are still up 14% YoY. Decline in demand for value added textile products was the main reason behind the MoM decline. While the decline may be shortlived, it raises concern regarding impact of a global economic slowdown on demand for textile products going into 2012. FBR REJECTS TARIFF RATIONALIZATION PLAN: As per newspaper reports, the FBR has reportedly rejected tariff rationalization plan, arguing that tariff rationalization cannot be a one step process as the present structure was evolved over decades after a mutually consultative process. A special meeting of the ECC of the Cabinet, to be presided over by Finance Minister Dr Abdul Hafeez Shaikh will consider the proposal, pending for the last three months. PSO IN URGENT NEED OF PRS35BN TO AVOID DEFAULT: With overall receivables rising to PRs147bn as of 15th August, Pakistan State Oil has once again raised the alarm bell for immediate payment of PRs35bn to avoid default on its LC payments. Reportedly, PSO has total payables of PRs159bn which include PRs96.8bn owed to international fuel oil suppliers. CUT-OFF YIELDS REMAIN UNCHANGED IN T-BILL AUCTION: In a T-bill auction held yesterday, the govt managed to raise PRs105.6bn against target of PRs90bn (and maturity of PRs91bn) with cut-off yields for 3M, 6M and 12M remaining the same as last auction at 13.0697%, 13.2787%, and 13.3768% respectively. Total participation amount of PRs148.5bn remained heavily skewed towards the longer term tenor with 84% of bids in 12M T-bill. THIS WEEK’S TOP STORIES MONDAY, AUGUST 22, 2011 - INDUS– EXPECT BETTER FY12, UPGRADE TO BUY We fine-tune Indus’s FY11E EPS to PRs27.8/sh, raise FY12/13 EPS by 1.8%/6.9%, PO from PRs 238 to PRs245 and upgrade to Buy. Although Indus increased prices while Yen was stable during 4Q – both should collude to improve EBITDA margins. However weak volumes and 15% tax surcharge should depress EPS by 16% QoQ to PRs7.4/sh. Going forward, we believe launch of new Corolla variants and price hike should boost both volumes and margins; though Yen volatility and risks to weak agriculture income remain key threats. Indus is currently trading at FY12E P/E of 5.9x and offers 7.2% D/Y and 18% upside to our PO. MUHAMMAD SAQIB SAJJAD ([email protected]) TUESDAY, AUGUST 23, 2011 - PAK BANKS - SPREADS AND ASSET QUALITY WATCH Banks sector spreads seem to have peaked out as these improved marginally by 2bp MoM to 7.88% in Jul-11. We expect drop in spreads going forward as (1) assets are re-priced to adjust for 50bp cut in DR, (2) competition on high-quality assets depressing risk premium, (3) floor of 5% at PLS accounts and (4) higher fresh deposits cost. Banks continue with the risk aversion theme where bulk of the 9.4% YTD deposit growth is parked in fixed income and Govt finances. Risk aversion has started to improve asset quality as gross NPLs corrected by 20bp to 14.8% of advances while coverage improved to 2ppt to 68.5%. We prefer MCB an UBL in Pak banking space. MCB is trading at 2011E P/B of 1.5x vs. RoE of 25% while UBL is at P/B of 0.9x (ROE of 17%). Although asset quality risks remain, we believe 16% D/Y in NBP could attract investor interest. MUHAMMAD SAQIB SAJJAD ([email protected]) WEDNESDAY, AUGUST 24, 2011- TRIPACK– ESTIMATES UP ON STRONG 2Q11 TRIPF posted strong 2Q11 results with, EPS of PRs6.56/sh, up 97% Y0Y; translating into 1H11 earnings of PRs12.97/sh, up 107% YoY. Higher than expected top-line growth due to higher BOPP prices drive our 10-12% CY11-13E earnings’ upgrade and we expect the company to post 2H11 earnings of PRs11.33/sh. We contend that robust BOPP demand should support prices in the near-term, despite rising PP prices. Subsequently, we have increased our DCF based PO by 7% to PRs195/sh (still only 8.0x ‘11E implied P/E vs. 11.62x 8-yr historical avg P/E); offering a total return of ~14% (PO upside 8% and D/Y of 6%). We maintain a positive stance. GUL-E-ZEHRA JAFRI ([email protected]) THURSDAY, AUGUST 25, 2011 - AUTOS: OGRA AT IT AGAIN Regulatory risk has once again come to haunt automakers as OGRA has banned the import of CNG cylinders from 12 suppliers, including Faber and EKC which supply CNG kits to PSMC and Indus respectively. Recall that OGRA banned Faber in Feb-11 on safety concerns; however the decision was later reversed within one month. Given our view on early resolution of the issue, we see this as more of a sentiment risk than financial risk to automakers’ performance. However, automakers may have to cut production during the interim period, if the process prolongs and their existing supplies are exhausted. This puts PSMC volumes at greater risk as CNG variants account for and gt;2/3rd of its volumes. Also, this could affect supply of Mehran and Bolan cars under the Punjab Govt taxi scheme that is supposed to start from Sep/Oct onwards. The effect should be lower for Indus as it has recently introduced CNG variant of its Corolla that has not gained significant chunk of its volumes as yet while Cuore is 10-12% of its volumes. MUHAMMAD SAQIB SAJJAD ([email protected]) STOCK MARKET SYNOPSIS LAST WEEK THIS WEEK % CHANGE Mkt. Cap (US $ bn) 33.48 33.45 -0.11% Avg. Dly T/O (mn. shares) 38.93 35.73 -8.22% Avg. Dly T/O (US$ mn.) 21.03 21.44 1.96% No. of Trading Sessions 4.0 4.0 - KSE 100 Index 10879.82 10901.76 0.20% KSE ALL Share Index 7571.75 7581.00 0.12% |