POL Earnings Expectation HY’09

POL Earnings Expectation HY'09 Pakistan Oilfields Limited (POL) is expected to declare its financial result for HY'09 today. We expect the company to post net income of Rs. 4.10 billion (EPS: Rs. 17.33) during this period as compared to Rs. 3.72 billion (EPS: Rs. 15.72) in HY'08, depicting an increase of 10.2% y-o-y. Our full years earnings expectation for the stock is PAT of Rs6.35 billion (EPS: Rs26.84) as compared to Rs8.62 billion (EPS: Rs36.43) in FY'08. We expect the company to declare cash dividend of Rs14.0 for FY'09

Credit to private sector falls by 47 per cent

Credit to private sector falls by 47 per cent Private sector credit off-take in 7MFY09 fell to Rs. 140 bn against Rs. 264 bn in the same period last year. The decline in private sector credit off-take can be attributable to the tight policy stance adopted by the central bank which significantly raised the weighted average lending rates.  During more than seven months, the broad money (M2) growth was just 1.48 per cent compared to 6.17 per cent during the same period last year. Since the inflation is still above 20 per cent and unemployment is on rise, the economy looks to enter into the state of stagflation. This is a stage when an economy has high inflation rate along with high unemployment. SBP estimates economy to grow by 3.7% this fiscal but the steep fall in the credit supply to private sector shows that the economic growth might fall further as some independent economists say the GDP growth could be around 2 to 2.5%.

OGDC Earnings Expectation HY’09

OGDC Earnings Expectation HY'09 The company is expected to announce its result for HY'09 on Thursday, February 26, 2009. Our earnings expectation for the company for HY'09 is Rs. 32.08 billion (EPS: Rs. 7.46) Net income vs. Rs. 24.00 billion (EPS: Rs. 5.58) in the same period last year, depicting an increase of 33.7% y-o-y. We also expect the company to announce second interim cash dividend of Rs. 2.0 per share, in addition to Rs2.0 per share declared earlier. Our full year's expectation is profit after tax of Rs. 64.16 billion (EPS: Rs. 14.92) as against Rs49.61 billion (EPS: Rs11.54) in FY'08. We also expect the company to make full year's dividend payout of Rs10.0 per share for FY'09 as compared to DPS of Rs. 9.50 in FY'08.

HBL - Earnings expectation 2009

HBL - Earnings expectation 2009   HBL is going to announce its full year result tomorrow. We estimate the bank to post handsome earning growth of 61.7% YoY to post PAT of Rs. 13 billion (EPS: Rs. 17.14). The handsome growth in earnings is attributable to lower provisioning by the banks against NPLs as compared to CY08. Total provision against NPL's is likely to stand at Rs. 4.5 bn against Rs. 8.16 bn depicting a decline of 44%. In 4QCY08, the bank is expected to post PAT of Rs. 3.39 bn (EPS: Rs. 4.47) against loss of Rs. 1.17 bn in 4QCY07 (LPS: Rs. 1.54). We expect cash dividend of Rs. 5 per share with possible bonus of 10%.

Stock Market News

Stock Market News    Distribution of dividends: insurance companies asked to recognize impairment as of December 31, 2008 Insurance companies have been asked to recognize the impairment in valuation of investment as of December 31st, 2008 for the purpose of distribution of dividend. In a circular issued by Insurance Division of the (SECP), insurance companies are allowed to value investment in Available-For-Sale (AFS) category at the purchase price and treat the impairment in valuation, at the end of the year, as temporary for finalization of accounts. However, the impairment has to be accounted @ 25% per quarter in 2009.  This may have a negative impact on the profit available for distribution by the insurance companies on account of significant fall in share prices during 2HY of CY'08.   Stocks reviewed in last three weeks  After witnessing a sharp fall of 48 percent post lifting of the floor, Pakistani stocks have rallied in the last three weeks, up 22%, on the back of good corporate announcements and improved sentiment amongst local investors. As a result, in 2009 thus far, compared with MSCI Asian Emerging markets average decline of 3%, Pakistan market has posted a decline of 1% in the US dollar terms. Pakistan market currently trades at a discount of 43% on average Asian PE, far higher than historical average discount of 30%.     Textile exports drop creating fear of big layoffs: The data released by FBS revealed that the textile and clothing exports dipped by 3.79 per cent to $5.827 billion in 7MFY09 as against $6.056 billion over last year despite depreciation of rupee, which should have made Pakistan's textile and clothing products more competitive. Imports of textile machinery dropped by 41% indicating the fact that textile manufacturers are not making any investment to increase their competitiveness. However export of non-textile products soared by 24.5% which helped to offset some of the decline in the textile exports. Total non-textile exports stood at $5.062bn in the period against $4.066bn recorded in 7MFY08.   Oil import bill soars by 26 per cent Total oil import bill went up to $6.436bn in 7MFY09 against $4.995bn in the same period last year. The surge can be accountable to decline in Rupee-dollar parity. Rupee depreciated by 30% since July 08 which will add up to the import bill as there is no letup in the quantity demand of oil imports.  A similar impact has been witnessed in the import bill of food items and agricultural products during the months under review. The food import bill is up by 20.52 per cent to $2.468 billion in July-Jan period this year against $2.048 billion over the last year. However significant decline was witnessed in some groups like transportation (decline of 41.72%) and telecom (decline of 47.7%)

Pakistan Stock Market News

Pakistan Stock  Market News   Talks deadlocked on deemed duty replacement Talks between oil refineries and the government over the issue of replacing deemed duty with processing fee have met a deadlock as the refineries have refused to accept processing fee offered by government from US$3.5 to US$5 per barrel crude oil, and demanded raise in deemed duty from 7.5% to 10%. Oil refineries were receiving more than US$10 per barrel through deemed duty when the global oil prices stood at US$147 per barrel. At the current 7.5% the refineries earned average deemed duty of US$8.6 per bbl during 8mths'09, as per our estimations. And at the current crude price of US$40-36/bbl, the deemed duty stands at US$4.53/bbl, significantly better then the proposed US$3.5/bbl processing fee for NRL & PRL and US$5/bbl for ATRL and BOSI.   Pakistan clears $517m Eurobond payment The country made entire payment due on Eurobond amounting to $517 mn indicating the country's ability to meet its external obligations after it was able to stem its external imbalances. Pakistan launched the five-year $500 million Eurobond on February 12, 2004, due in 2009, which was a successful return of the country to the international capital markets after a gap of five years. The bond was oversubscribed by 5 times when it was launched with price of 370bps above US Treasury (3.046 %) to yield 6.75 %.  However under the current global economic scenario any new issue will be unattractive.   Net foreign inflows fall 12.7pc in 7MFY09 Foreign investment fell to around $2.23 bn in 7MFY09 as compared to $2.25 bn in the same period last year mainly due to outflows in portfolio investment. Total foreign portfolio investment outflows were recorded at $356 mn as compared to net inflows of $0.4 mn during 7MFY08. FDI however keep its upward momentum with increase of 1.3% to stand at $2.58bn in the period. High FDI reflects international investors' confidence in the country fundamentals with population of 160 mn of which majority lies in the working age. Details showed that foreign direct inflows came from various regions and countries. The trend of inflows did not change except that inflows from the North America witnessed a sharp fall.

STOCK MARKET NEWS

OMCs raise furnace oil price by Rs 737 per ton   Furnace oil price has gone up by Rs. 737 per ton from Rs. 27,415.44 to Rs 28,152.44 per ton due to rising demand and low supply. Furnace oil is a high margin product for OMCs and commands over a significant potion of their sales volumes. This rise in furnace oil prices will have a positive impact on the revenues of OMC who are already struggling on account of rising debt and inventory losses.     Rs 75 billion TFC for Pepco planned   Rising circular debt has engulfed the private sector power companies as well, hindering their power generation capacity. These public sector power companies have developed large payable amounts to IPPs, who in turn owe money to their fuel suppliers. To reduce the magnitude of this circular debt, Pepco will float TFC's of Rs75b as part of its strategy to settle Rs160b. The TFC for three to four years is expected to be launched this week. The MoF officials say that the TFC will bail PSO out of circular debts, as all its debts will be shifted to Pepco. The government has decided to pay 50% of circular debt by the end of this month and remaining outstanding payment will be made by June 2009. This would ease cash flow problems for OMCs and IPPs, as well as reduce their finance cost.   PPIB receives 10 bids for 1,191MW power generation   The project, which will be implemented by the end of this year, requires investment in tune of $1.42 bn. The encouraging response by investor reflects the attractiveness of the power sector which is currently facing demand-supply mismatches. This was in continuation of the 'Fast Track Private Power Projects' initiative of the government. The initial phase of the process has already resulted in project solicitations of 780 MW of rentals expected to come on line by the end of this year. A fast track independent power producer (IPP) of 172 MW is expected by mid 2010, while three other IPP proposals of 964 MW are under evaluation, which are expected to be commissioned in 2010/11.

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