SECP rule relaxation likely to boost stocks

SECP rule relaxation likely to boost stocks   SECP granted relaxation in the accounting treatment for equity securities held by the companies under the head 'Available for Sale' (AFS) as required under International Accounting Standard "Financial Instrument: Recognition and Measurement" (IAS 39) on Friday. Under the IAS 39, investments by companies held under AFS category had to be adjusted to Profit and Loss account incase of impairment of fair value of investment below its carrying value. Under the relaxation offered through an SRO, the impairment in fair value of investment will be taken into 'equity' account rather than P&L. The move will benefit companies multiple sectors particularly banking, insurance and mutual funds and modarabas which have heavy investments in equity market.

OGDCL AND PPL DISCOVERY AT QADRIPUR DEEP NO. 1

Impact of discovery at Qadirpur Deep No.1   Oil & Gas Development Company Limited (OGDC) has made a medium sized gas discovery at Qadirpur Deep 1 located at Ghotki, Sindh. OGDC being the operator of the field has 75.0% share, whereas other joint ventures include PPL with 7.0% share, KUFPEC with 8.5% share and PKP with 9.5% share. This is the fourth discovery by the company during the current fiscal.   The size of the discovery according to initial testing is 4.28mmcfd of gas. Production from this well is likely to start from September 2009. This new discovery is likely to have a per share impact of Re0.03 and Re0.02 on the FY'10 earnings of OGDC and PPL respectively.   Impact of discovery at Qadirpur Deep 1   OGDC  PPL Old EPS FY'10               15.14        31.57 New EPS FY'10               15.17        31.59 Impact (Rs/share)                 0.03          0.02

National Refinery Limited - Earnings expectation HY’09

National Refinery Limited - Earnings expectation HY'09   National Refinery Limited (NRL) is expected to declare its financial result for HY'09 on February 14, 2009. We expect the company to post net income of Rs.548 million (EPS: Rs.6.86) during this period as compared to Rs.1.97 billion (EPS: Rs.24.73) in HY'08, depicting a decrease of 72.3% on y-o-y basis. The decline is primarily due to inventory losses given to the fall in crude oil prices. Our full years earnings expectation for the stock is profit after tax of Rs.2.69 billion (EPS: Rs.33.63) as compared to Rs.6.0 billion (EPS: Rs.75.10) in FY'08, showing a decline of 55.2%. We do not expect the company to declare any interim cash dividend; however our final per share cash dividend expectation (to be declared at the end of the year) is of Rs.13.50 for FY'09 (similar to the payout ratio for FY05).

STOCK MARKET NEWS

Pakistan Stock Market in the News   Economy and Oil   The WB mission, which visited Pakistan last month, had sought commitment from the government not to accumulate the PDC on petroleum products even if the oil prices in the global market shot up in future; thus passing the full impact on the consumers. The agreement has been inked between the two parties. Due to the subsidies provided by the government on POL and energy products has resulted in inter circular debt which has gone above Rs300 billion by the end of Nov'08. By eliminating the PDCs to the consumers the cash flow problems that the OMCs are experiencing will be removed completely in future.   Trade deficit jumps to $10.727 billion   The country's trade deficit has jumped to US$10.72 billion in 7mths'09, with 3.5% increase against US$10.35 billion of the corresponding period of last year. Exports registered growth of 8.02%, while imports grew by 5.77%. 83.5% of exports were from cement, chemicals and rice, whereas 95% of imports were on account of petroleum, fertilizer and wheat. Trade deficit was at US$1.16 billion in January 2009 against US$2.064 billion in January of last year. Surge in trade deficit on Y-o-Y basis was mainly due to costly imports of oil, fertilizer, wheat and other essentials and decline in textile sector's dyeing exports. Severe shortages of gas and power and rupee devaluation were other major reason for low exports by textile and other major industries. The shrinking imports and exports due to the global economic scenario will ultimately result in the reduction in value of trade deficits resulting in to favorable balance of payments.   Inflation eases to 20.52pc Inflation continued its downward trend on account of significant easing of food inflation and stability in oil prices. Headline inflation as measured by CPI was down by 42 bps from the previous month. Y-o-Y CPI eased at 20.52% down from 23.34% witnessed during Dec 2008. Core inflation however remained sticky and witnessed Y-o-Y growth of 18.9%. Average inflation for the Jul 08-Jan 09 period was recorded at 23.85%. Govt. estimates average headline inflation to stand at 20% for FY09.      Consensus on available for sale (AFS) impairment losses   During the meeting of ICAP with various stakeholders, a consensus was reached on the issue of impairment losses incurred in available for sale securities (AFS). Accordingly any impairment loses on AFS investments under IAS-39 should not be routed through profit and loss account, and instead, be taken to equity directly. This bodes well for companies with huge investment portfolios particularly in equity market which had been battered in CY08. KSE 100 index fell by a staggering 58.3% more because of the extraordinary conditions which prevailed in the market. The move will particularly favor banking and insurance scripts which have significant exposure in stock market.   If you have any query or question please contact our research analysts: Muhammad Ijaz  stockmarketpk@gmail.com

"MCB - Earnings expectation"

"MCB - Earnings expectation CY’09"

"MCB" Bank will declare its full year results on 10th Feb, 2009. The bank is expected to post PAT of Rs. 15.027 billion (EPS of Rs. 23.92) down by 1.56% from the previous year. In 4QCY08 the bank is expected to post PAT of Rs.3.40 billion (EPS of Rs. 5.42) resulting in a Y-o-Y decline of 15.3%. We expect the bank to announce final cash dividend of Rs.3 per share taking the full year payout to Rs.12 per share. The company is likely to announce bonus issue (20-25%) as well; as it has to increase it’s paid up capital to Rs. 10 billion by 2010. The current paid up capital of the company stands at Rs. 6.282 billion.

Fauji Cement Production Enhancement.

According to the company, FCCL is set to build the largest cement manufacturing plant in the country with a capacity to produce 7,200 tons of clinker per day. The Company had entered into contract with a world renowned cement plant manufacturing firm Polysius AG ( Germany ) to supply state of the art plant and machinery to produce 7200 tons per day of clinker. Additional production of cement by FCCL will help stabilize the cement prices in the local market

Banks shift to invest in T-bills

Banks shift to invest in T-bills

In the auction yesterday, SBP was able to sell treasury bills worth Rs70.543 billion while the target was set for Rs70 billion which means the SBP succeeded in attracting banks’ investment. The Banks, however, were still investing for short-term paper of three-month tenure. They bought three-month t-bills for Rs66.337 billion while the rest was invested for six months. No bid was offered for 12 months. Banks are investing in lower maturity instruments so that they can reinvest in case of further policy rate hike by the Central Bank. The shift in banks investment to T-bills which are offering attractive cut-off yield of 13.85% p/a (3 months) will help the government to meet its budgetary requirement from the banking system rather than the inflationary borrowing which it makes from the Central Bank. However shift in banking strategy to invest in government securities or other security papers will result in lower private sector credit flow.