International crude oil and HSFO prices led the surge
The Oil and Gas Regulatory Authority (OGRA) has recently issued new wellhead gas prices for the period of 2HFY10 which indicated the surge of around 3% to 67% relying upon the field’s pricing mechanism. The revision was accounted in response to the increase in international crude oil prices along with the HSFO prices.
Arab Light Crude prices upped by 37%HoH
Arab Light Crude prices showed an up-move by 37%HoH during 1HFY10 to USD 69.09 per barrel on average comparing to the averaged price of USD 50.30 per barrel during 2HFY09. On the other hand, the PKR-USD Parity depreciated by 4%HoH during 1HFY10 to 83.12 comparing to 80.23 during the earlier half. On the other hand, HSFO witnessed 43%HoH increase to USD 422.06 per ton during the period.
Sui field witnessed the largest increment
The Sui and Kandhkot field prices increased by 24.3%HoH and 19.1%HoH respectively while Sawan and Minao wellhead gas prices upped by 19.4%HoH to USD 3.50mmbtu during the review. Moreover, the Adhi field prices depicted an up-surge of 3.7%HoH to PKR 124.03mmbtu where Bhit, Pindori and Pariwali fields witnessed a price increase of 19.4%HoH during the period.
PPL would be the major beneficiary
I believe that Pakistan Petroleum Limited (PPL) would be the major beneficiary of these revisions in wellhead gas prices as Sui and Kandhkot fields who witnessed the largest price increase are under 100% stake of PPL coupled with some other beneficiary fields. On the other hand, Pindori and Adhi fields are expected to improve the earnings of OGDCL and POL during the remaining half of the year.
Looking Forward
I maintain ‘buy’ stance for PPL and POL and ‘hold’ for OGDC by considering their FY10E earnings at is 8.44x, 8.43x and 10.11x respectively where my target price for FY10 is PKR 228, PKR 275 and PKR 122.50 per share respectively.
Thursday, April 15, 2010
Wednesday, April 14, 2010
Inflation 9MFY10 Review
Consumer Price Index (CPI) placed at 12.91%YoY
The Federal Bureau of Statistics (FBS) has recently disclosed the inflation figures for the period of 9MFY10. The CPI based inflation increased by 12.91%YoY during the period comparing to 13.04%YoY during the earlier month of the same year. However, the period witnessed the increment of 1.25%MoM during the period as the CPI index stood at 219.65 points against 216.93 points during the previous month. The continual dual number Inflation is largely because of higher international oil prices coupled with Government of Pakistan (GoP) borrowings for financing its fiscal deficit as well as increased power tariffs and supply side constraints.
Food and beverages led higher average CPI
The average CPI during the period of 9MCY10 rose by 11.29% comparing to 9MCY09. The upward momentum was principally motivated by the rise in prices of Food and beverages and non-perishable items in CPI basket.
SPI surged by 18.17%YoY
The Sensitive Price Index (SPI) and Wholesale Price Index (WPI) witnessed surge of 18.17%YoY and 21.80%YoY correspondingly during the period while comparing to the earlier month both reveals an upward trend of 0.78%MoM and 2.53%MoM respectively. Moreover, the indices of SPI and WPI stood at 255.84 points and 237.51 points respectively comparing to 253.87 points and 231.64 points respectively during the earlier month of the same year.
Core Inflation lowered to 9.90%
The core inflation stood at 9.90% during the period comparing to 10.10% during the earlier month which showed reduction by 20bpsMoM during the period while on yearly basis the downward trend continued during the period which depicted 46.49%YoY decrease comparing to the same period last year.
Looking Forward
I believe that additional raise in electricity tariff and volatile commodity prices will act as a medium to push the prices in upward move. However, the rebirth of higher base from 9MFY09 might carry various breathers to the elevated price levels. On the other hand the average inflation for FY10 is expected to settle around 12.5%.
The Federal Bureau of Statistics (FBS) has recently disclosed the inflation figures for the period of 9MFY10. The CPI based inflation increased by 12.91%YoY during the period comparing to 13.04%YoY during the earlier month of the same year. However, the period witnessed the increment of 1.25%MoM during the period as the CPI index stood at 219.65 points against 216.93 points during the previous month. The continual dual number Inflation is largely because of higher international oil prices coupled with Government of Pakistan (GoP) borrowings for financing its fiscal deficit as well as increased power tariffs and supply side constraints.
Food and beverages led higher average CPI
The average CPI during the period of 9MCY10 rose by 11.29% comparing to 9MCY09. The upward momentum was principally motivated by the rise in prices of Food and beverages and non-perishable items in CPI basket.
SPI surged by 18.17%YoY
The Sensitive Price Index (SPI) and Wholesale Price Index (WPI) witnessed surge of 18.17%YoY and 21.80%YoY correspondingly during the period while comparing to the earlier month both reveals an upward trend of 0.78%MoM and 2.53%MoM respectively. Moreover, the indices of SPI and WPI stood at 255.84 points and 237.51 points respectively comparing to 253.87 points and 231.64 points respectively during the earlier month of the same year.
Core Inflation lowered to 9.90%
The core inflation stood at 9.90% during the period comparing to 10.10% during the earlier month which showed reduction by 20bpsMoM during the period while on yearly basis the downward trend continued during the period which depicted 46.49%YoY decrease comparing to the same period last year.
Looking Forward
I believe that additional raise in electricity tariff and volatile commodity prices will act as a medium to push the prices in upward move. However, the rebirth of higher base from 9MFY09 might carry various breathers to the elevated price levels. On the other hand the average inflation for FY10 is expected to settle around 12.5%.
Tuesday, April 13, 2010
Automobile Sector 9MFY10 Review
Sector witnessed the increase of 7.8%MoM
The Pakistan Automotive Manufacturers Associations (PAMA) has recently released the production and sales figures for the period of 9MFY10. The sector witnessed the increase of 7.8%MoM during the period to 12,618 units comparing to 11,703 units during last month. On the other hand, the 9MCY10 sales showed 34%YoY growth to 97,918 units comparing to 73,071 units during the same period last year.
Pak Suzuki Motor Company (PSMC) remained the market leaderThe PSMC remained the market leader by further improving its market share to 52% from 51% last month where INDU improved its market share from 35% to 38% during the period. On the other hand, the HCAR market share shrank to 9% from 12% last month while DFML market share remained lowest during the period.
Indus Motors (INDU) showed the largest growthThe sales of INDU showed the largest growth of 16.6% during the period to 4,837 units from 4,150 units during the earlier month followed by PSMC who increased its sales by 9.1% during the period to 6,512 units comparing to 5,970 units during the preceding month where Honda Atlas (HCAR) sales travelled in declining momentum by 18.3% to 1,151 units comparing to 1,409 units during the earlier month. The Dewan Farooq Motors Limited (DFML) remained the owner of lesser unit wise sales.
Corolla remained on top with 4,417 unitsThe sales of Liana witnessed the tremendous growth of 297% to make 119 units of sales during the period comparing to 30 units during the corresponding month while Swift showed 19.21% decrease in its sales during the period. The Corolla remained on top with the sales of 4,147 units during the period showing 19.13% surge during the period while HCAR’s Civic and City showed the 14.19% and 21.42% decline during the period.
Looking Forward
The automobile sales are improving coupled with ongoing economic recovery. I expect further enlargement if SBP eases monetary policy going forward. On the other hand, the cost of production are expected to remain in upward momentum with respect to the depreciating PKR-USD and PKR-JPY parity however, the margins are expected to be stabilized by upward revision of product pricing by the auto sector. I recommend 'hold' stance for INDU and PSMC scrips by considering their current trading at FY10E of 8.35x and 10.44x where our target price for FY10 is PKR 214 and PKR 107 per share respectively.
The Pakistan Automotive Manufacturers Associations (PAMA) has recently released the production and sales figures for the period of 9MFY10. The sector witnessed the increase of 7.8%MoM during the period to 12,618 units comparing to 11,703 units during last month. On the other hand, the 9MCY10 sales showed 34%YoY growth to 97,918 units comparing to 73,071 units during the same period last year.
Pak Suzuki Motor Company (PSMC) remained the market leaderThe PSMC remained the market leader by further improving its market share to 52% from 51% last month where INDU improved its market share from 35% to 38% during the period. On the other hand, the HCAR market share shrank to 9% from 12% last month while DFML market share remained lowest during the period.
Indus Motors (INDU) showed the largest growthThe sales of INDU showed the largest growth of 16.6% during the period to 4,837 units from 4,150 units during the earlier month followed by PSMC who increased its sales by 9.1% during the period to 6,512 units comparing to 5,970 units during the preceding month where Honda Atlas (HCAR) sales travelled in declining momentum by 18.3% to 1,151 units comparing to 1,409 units during the earlier month. The Dewan Farooq Motors Limited (DFML) remained the owner of lesser unit wise sales.
Corolla remained on top with 4,417 unitsThe sales of Liana witnessed the tremendous growth of 297% to make 119 units of sales during the period comparing to 30 units during the corresponding month while Swift showed 19.21% decrease in its sales during the period. The Corolla remained on top with the sales of 4,147 units during the period showing 19.13% surge during the period while HCAR’s Civic and City showed the 14.19% and 21.42% decline during the period.
Looking Forward
The automobile sales are improving coupled with ongoing economic recovery. I expect further enlargement if SBP eases monetary policy going forward. On the other hand, the cost of production are expected to remain in upward momentum with respect to the depreciating PKR-USD and PKR-JPY parity however, the margins are expected to be stabilized by upward revision of product pricing by the auto sector. I recommend 'hold' stance for INDU and PSMC scrips by considering their current trading at FY10E of 8.35x and 10.44x where our target price for FY10 is PKR 214 and PKR 107 per share respectively.
Monday, April 12, 2010
Oil Marketing Companies (OMCs) 9MCY10 Review
Sales increased by 10.5%YoY
The Oil Companies Advisory Committee (OCAC) has recently disclosed the sales figures for the period of 9MCY10. The sales increased by 10.5%YoY to 14.8 Million tons during the period comparing to 13.4 Million tons during the same period last year where during 9MFY10 the overall sales volume stood at 1.73 Million tons showing 33%MoM increase comparing to the previous month of the same year.
FO volumetric sales led the up-surge
The decent size up-surge was mainly in contribution to Furnace Oil (FO) volumes during the period which depicted an increase of 12.4%YoY to place at 6.6 Million tons comparing to 5.87 Million tons during the same period last year mainly on the back of higher dependence on the thermal power generation.
Mogas witnessed highest increase during the period
The Mogas sales witnessed 32.4%YoY growth to 1.42 Million tons comparing to 1.07 Million tons during the same period last year chiefly in response to the gas shortage which allowed the shutdown of CNG Stations and pulled the Mogas demand on high. Furthermore, the Jet Fuel upped by 31.5%YoY to 1.09 Million tons in contrast to 0.83 Million tons during the same period last year while HSD sales remained slower to stand at 5.53 Million tons comparing to 5.44 Million tons during the corresponding period last year mainly in contribution to the slowdown in economy.
PSO remained the market leader
Pakistan State Oil (PSO) remained the market leader during the period by maintaining its position at 69.5% mainly in response to the continuous rising trend in FO sales which stood at 88.7% during the period while Mogas and High Speed Diesel (HSD) sales of the company witnessed a downward momentum to 48.3% and 61.3% in that order. On the other hand, the market share of Attock Petroleum Limited (APL) also rose to 5.5% in response to the enhancement in the sale of HSD to 6.7% while shell dropped its market share to 12% during the period.
Looking Forward
I believe that the FO sales will continue rising as around 1,800MW thermal units are expected to commercialize by FY11 while the circular debt issue will remain the hurdle for industry. I currently maintain ‘buy’ stance for PSO, APL and SHELL by considering their FY10E trading at 6.47x, 6.67x and 7.50x respectively where my target price of PSO, APL and SHELL for FY10 is PKR 390, PKR 415 and PKR 390 per share respectively.
The Oil Companies Advisory Committee (OCAC) has recently disclosed the sales figures for the period of 9MCY10. The sales increased by 10.5%YoY to 14.8 Million tons during the period comparing to 13.4 Million tons during the same period last year where during 9MFY10 the overall sales volume stood at 1.73 Million tons showing 33%MoM increase comparing to the previous month of the same year.
FO volumetric sales led the up-surge
The decent size up-surge was mainly in contribution to Furnace Oil (FO) volumes during the period which depicted an increase of 12.4%YoY to place at 6.6 Million tons comparing to 5.87 Million tons during the same period last year mainly on the back of higher dependence on the thermal power generation.
Mogas witnessed highest increase during the period
The Mogas sales witnessed 32.4%YoY growth to 1.42 Million tons comparing to 1.07 Million tons during the same period last year chiefly in response to the gas shortage which allowed the shutdown of CNG Stations and pulled the Mogas demand on high. Furthermore, the Jet Fuel upped by 31.5%YoY to 1.09 Million tons in contrast to 0.83 Million tons during the same period last year while HSD sales remained slower to stand at 5.53 Million tons comparing to 5.44 Million tons during the corresponding period last year mainly in contribution to the slowdown in economy.
PSO remained the market leader
Pakistan State Oil (PSO) remained the market leader during the period by maintaining its position at 69.5% mainly in response to the continuous rising trend in FO sales which stood at 88.7% during the period while Mogas and High Speed Diesel (HSD) sales of the company witnessed a downward momentum to 48.3% and 61.3% in that order. On the other hand, the market share of Attock Petroleum Limited (APL) also rose to 5.5% in response to the enhancement in the sale of HSD to 6.7% while shell dropped its market share to 12% during the period.
Looking Forward
I believe that the FO sales will continue rising as around 1,800MW thermal units are expected to commercialize by FY11 while the circular debt issue will remain the hurdle for industry. I currently maintain ‘buy’ stance for PSO, APL and SHELL by considering their FY10E trading at 6.47x, 6.67x and 7.50x respectively where my target price of PSO, APL and SHELL for FY10 is PKR 390, PKR 415 and PKR 390 per share respectively.
Friday, April 9, 2010
Pakistan Petroleum Limited (PPL) at Glance
Scrip gained 5% in April 2010
Since the start of current month Pakistan Petroleum Limited (PPL) scrip has gained 5% or PKR 9.31 increase in its price from PKR 195.42 per share to PKR 204.73 till April 07, 2010 mainly at the back of the attractive valuation coupled with upcoming triggers including recent production expansions in support of the increase in wellhead gas prices.
PPL attracting foreigners
The aggressive foreign buying in oil and gas sector of the country precisely in OGDC for quite a long period is now triggering the foreigners to park their investment in other companies where PPL owing a sizeable float in the market is also attracting them primarily based on attractive valuation bundled with expected positive developments.
Another discovery at Latif Block
The company has recently disclosed a finding at Latif Block which is under a Joint-Venture (JV) between the PPL, OMV and ENI owing an equally distributed stake i.e. 33.3%. The company didn’t quote any number regarding the incremental production however the current production of the block stands around 30mmcfd of gas.
70 drills down the roadThe company has aimed to drill 70 exploratory along with 80 development wells in the upcoming 5 years. Currently, the company has a trend to make 4 explorations on average if examine the last 3 years’ trend which is creating a greater hope for the company to easily achieve the set targets. Moreover, the new production flows from at least 2 fields are expected to commence during the current quarter that are expected to contribute 4,300bpd oil and 85mmcfd gas where further 2 are expected to contribute in beginning of later half of the same year. The further benefit is likely to come from the increase in wellhead gas prices especially from Sui and Kandhkot to improve by 20%.
Looking Forward
I maintain ‘buy’ stance for PPL scrip by considering its FY11E earnings at 6.59x where my target price for FY11 is PKR 230 per share.
Since the start of current month Pakistan Petroleum Limited (PPL) scrip has gained 5% or PKR 9.31 increase in its price from PKR 195.42 per share to PKR 204.73 till April 07, 2010 mainly at the back of the attractive valuation coupled with upcoming triggers including recent production expansions in support of the increase in wellhead gas prices.
PPL attracting foreigners
The aggressive foreign buying in oil and gas sector of the country precisely in OGDC for quite a long period is now triggering the foreigners to park their investment in other companies where PPL owing a sizeable float in the market is also attracting them primarily based on attractive valuation bundled with expected positive developments.
Another discovery at Latif Block
The company has recently disclosed a finding at Latif Block which is under a Joint-Venture (JV) between the PPL, OMV and ENI owing an equally distributed stake i.e. 33.3%. The company didn’t quote any number regarding the incremental production however the current production of the block stands around 30mmcfd of gas.
70 drills down the roadThe company has aimed to drill 70 exploratory along with 80 development wells in the upcoming 5 years. Currently, the company has a trend to make 4 explorations on average if examine the last 3 years’ trend which is creating a greater hope for the company to easily achieve the set targets. Moreover, the new production flows from at least 2 fields are expected to commence during the current quarter that are expected to contribute 4,300bpd oil and 85mmcfd gas where further 2 are expected to contribute in beginning of later half of the same year. The further benefit is likely to come from the increase in wellhead gas prices especially from Sui and Kandhkot to improve by 20%.
Looking Forward
I maintain ‘buy’ stance for PPL scrip by considering its FY11E earnings at 6.59x where my target price for FY11 is PKR 230 per share.
Thursday, April 8, 2010
Lotte Pakistan PTA (LOTPTA) at Glance
Planning to payoff USD 63 Million loan
The management of Lotte Pakistan (LOTPTA) has recently decided to retire its foreign loan of USD 63 Million and to further invest USD 40 Million in Pakistan in a captive power plant for uninterrupted power supply while USD 5 Million in a catalyst recovery plant for cost efficiency. I believe that these steps will help the company’s volatile margins to improve.
Higher current assets will led this payoff
The company is considering the loan payoff option in support of ample amount of cash and cash equivalent owned in FY09. The company had the cash and cash equivalents of PKR 5.4 Billion during the period comparing to PKR 16.45 Million during the same period last year which translated tremendous increase of 329.65%YoY during the period.
PKR-USD Parity expected to remain depreciating
I believe that this initiation would result in hedging the company against exchange losses as the PKR-USD parity is expected to remain in a meager downward momentum going forward. Conversely, the deposit income will be lowered going forward.
PTA prices touched 18 months high level
The Purified Terephthalic Acid (PTA) touched the 18 months high level of USD 979 per tons on April 01, 2010. The up-surge in price is mainly attributed to the higher demand of Polyester Fiber from China and India.
Looking Forward
With rising PTA prices in international market I assume that the margins of the company will further improve to USD 350 per tons comparing to USD 245 during FY09 while I expect PTA demand to grow up by 5% in FY10. On the other hand, the further saving from captive power plant & catalyst recovery plant will start producing the results from FY12. I maintain ‘buy’ stance for the company’s scrip by considering the current trading at FY10E 7.04x where my target price for FY10 is PKR 25 per share.
The management of Lotte Pakistan (LOTPTA) has recently decided to retire its foreign loan of USD 63 Million and to further invest USD 40 Million in Pakistan in a captive power plant for uninterrupted power supply while USD 5 Million in a catalyst recovery plant for cost efficiency. I believe that these steps will help the company’s volatile margins to improve.
Higher current assets will led this payoff
The company is considering the loan payoff option in support of ample amount of cash and cash equivalent owned in FY09. The company had the cash and cash equivalents of PKR 5.4 Billion during the period comparing to PKR 16.45 Million during the same period last year which translated tremendous increase of 329.65%YoY during the period.
PKR-USD Parity expected to remain depreciating
I believe that this initiation would result in hedging the company against exchange losses as the PKR-USD parity is expected to remain in a meager downward momentum going forward. Conversely, the deposit income will be lowered going forward.
PTA prices touched 18 months high level
The Purified Terephthalic Acid (PTA) touched the 18 months high level of USD 979 per tons on April 01, 2010. The up-surge in price is mainly attributed to the higher demand of Polyester Fiber from China and India.
Looking Forward
With rising PTA prices in international market I assume that the margins of the company will further improve to USD 350 per tons comparing to USD 245 during FY09 while I expect PTA demand to grow up by 5% in FY10. On the other hand, the further saving from captive power plant & catalyst recovery plant will start producing the results from FY12. I maintain ‘buy’ stance for the company’s scrip by considering the current trading at FY10E 7.04x where my target price for FY10 is PKR 25 per share.
Wednesday, April 7, 2010
Pak Suzuki Motors (PSMC) FY09 Review
Posted the NPAT of PKR 255 Million
The Pak Suzuki Motors (PSMC) has recently announced its result for the period of FY09. The company posted the NPAT of PKR 255 Million comparing to PKR 625 Million during the same period last year which translated a tremendous decline during the reviewing period. The EPS of the bank nose-dived to PKR 3.10 comparing to PKR 7.59 last year.
Net sales dwindled by 34%YoY
The Net Sales of the company dwindled by 34%YoY to PKR 26.23 Billion from PKR 39.67 Billion last year mainly in response to the lower volumetric sales to 51,521 units during the period. Moreover, the cost pressures remained the key concern for the company during the period primarily due to depreciating PKR-USD and PKR-JPY Parity coupled with the increase in steel prices during FY09. However, the increase in car prices supported the margins to show 70bps increment in gross profit margins (GPM) to 2.2% during the period.
Lower bank deposits shrank other income
The other income of the company shrank by 54%YoY to PKR 620 Million comparing to PKR 1.35 Billion last year mainly at the back of deposit income which squeezed by 39%YoY to PKR 408 Million against PKR 671 Million last year.
Finance cost squeezed by 75%YoY
The finance cost of the company witnessed a massive reduction by 75%YoY to PKR 13 Million comparing to PKR 53 Million during the same period last year. The decline was mainly attributed to reduction in interest rate during the period.
Looking Forward
I believe that the PKR-JPY parity is turning back to its historical trend while steel prices also look stable going forward. Moreover, the volumetric sales has already picked up and showed a decent growth in 2HCY09 while the company has increased its sales prices by an average 2% (PKR 10,000 to PKR 15,000) during 3MFY10 which is over and above the estimated surge of 3.5% in company's cost of production during the same period. I maintain ‘buy’ stance for the company by considering its FY10E earnings at 10.25x where my target price for 1HCY10 is PKR 107 per share.
The Pak Suzuki Motors (PSMC) has recently announced its result for the period of FY09. The company posted the NPAT of PKR 255 Million comparing to PKR 625 Million during the same period last year which translated a tremendous decline during the reviewing period. The EPS of the bank nose-dived to PKR 3.10 comparing to PKR 7.59 last year.
Net sales dwindled by 34%YoY
The Net Sales of the company dwindled by 34%YoY to PKR 26.23 Billion from PKR 39.67 Billion last year mainly in response to the lower volumetric sales to 51,521 units during the period. Moreover, the cost pressures remained the key concern for the company during the period primarily due to depreciating PKR-USD and PKR-JPY Parity coupled with the increase in steel prices during FY09. However, the increase in car prices supported the margins to show 70bps increment in gross profit margins (GPM) to 2.2% during the period.
Lower bank deposits shrank other income
The other income of the company shrank by 54%YoY to PKR 620 Million comparing to PKR 1.35 Billion last year mainly at the back of deposit income which squeezed by 39%YoY to PKR 408 Million against PKR 671 Million last year.
Finance cost squeezed by 75%YoY
The finance cost of the company witnessed a massive reduction by 75%YoY to PKR 13 Million comparing to PKR 53 Million during the same period last year. The decline was mainly attributed to reduction in interest rate during the period.
Looking Forward
I believe that the PKR-JPY parity is turning back to its historical trend while steel prices also look stable going forward. Moreover, the volumetric sales has already picked up and showed a decent growth in 2HCY09 while the company has increased its sales prices by an average 2% (PKR 10,000 to PKR 15,000) during 3MFY10 which is over and above the estimated surge of 3.5% in company's cost of production during the same period. I maintain ‘buy’ stance for the company by considering its FY10E earnings at 10.25x where my target price for 1HCY10 is PKR 107 per share.
Tuesday, April 6, 2010
Allied Bank Limited (ABL) FY09 Review
ABL outperformed the overall banking sector
Allied Bank Limited (ABL) has recently disclosed its detailed accounts for the period of FY09. The bank posted the NPAT of PKR 7.1 Billion during the period comparing to PKR 4.1 Billion during the same period last year which translated 73%YoY growth during the reviewing the period while EPS stood at PKR 9.1 during the comparing to PKR 5.2 during the corresponding period last year. Moreover, the bank announced the final cash dividend of PKR 2.00 per share coupled with 10% bonus shares.
NII surged by 41%YoY
The Net Interest Income of the bank surged by 41%YoY to PKR 18.7 Billion comparing to PKR 13.3 Billion during the same period last year. The massive expansion comparing to the peers was in response of 190bps jump in earnings yield to 13.4% during the period as the bank lend its money by adopting the valuable strategy where peers remained risk averse and preferred to invest the excess liquidity in government instruments. On the other hand, the NIMs of the bank rose by 85bpsYoY to 6.1% comparing to an average NIMs expansion of 33bpsYoY for peers.
Non-interest income upped by 20%YoY
The Non interest income of the bank witnessed 20%YoY increase to PKR 6.0 Billion from PKR 5.0 Billion in last year mainly at the back of increase in gains from the sales of securities to PKR 1.1 Billion. Moreover, the dividend income of the bank took a slight dip where income from foreign currency account rose by 231%YoY.
NPLs improved to 6.5%
The NPLs of the bank increased by 18%YoY to PKR 16.3 Billion which allowed the NPL ratio to stand at 6.5% coupled with the coverage ratio which was at 77% during the period. The bank made the total provisions of PKR 4.5 Billion during the period comparing to PKR 3.2 Billion last year which depicted a massive surge of 41%YoY during the reviewing period. As a proportion of total loan book, exposure to textile declined by 200bpsYoY to 18%, share of sugar was down 63bpsYoY to 1.33% and retail exposure remained flat at 2.5%
Looking Forward
ABL owns enough competence to retain strong bottom-line growth going forward. The bank is targeting to raise its exposure to high yielding SME segment. Moreover, the non-interest income of the bank is expected to remain growing mainly at the back of higher capital gains on its equity portfolio where the bank currently has PKR 2 Billion as un-realized gains. I currently maintain ‘hold’ stance on the ABL’s scrip by considering its FY10E earnings at 6.68x where my target price for FY10 is PKR 69.50 per share.
Allied Bank Limited (ABL) has recently disclosed its detailed accounts for the period of FY09. The bank posted the NPAT of PKR 7.1 Billion during the period comparing to PKR 4.1 Billion during the same period last year which translated 73%YoY growth during the reviewing the period while EPS stood at PKR 9.1 during the comparing to PKR 5.2 during the corresponding period last year. Moreover, the bank announced the final cash dividend of PKR 2.00 per share coupled with 10% bonus shares.
NII surged by 41%YoY
The Net Interest Income of the bank surged by 41%YoY to PKR 18.7 Billion comparing to PKR 13.3 Billion during the same period last year. The massive expansion comparing to the peers was in response of 190bps jump in earnings yield to 13.4% during the period as the bank lend its money by adopting the valuable strategy where peers remained risk averse and preferred to invest the excess liquidity in government instruments. On the other hand, the NIMs of the bank rose by 85bpsYoY to 6.1% comparing to an average NIMs expansion of 33bpsYoY for peers.
Non-interest income upped by 20%YoY
The Non interest income of the bank witnessed 20%YoY increase to PKR 6.0 Billion from PKR 5.0 Billion in last year mainly at the back of increase in gains from the sales of securities to PKR 1.1 Billion. Moreover, the dividend income of the bank took a slight dip where income from foreign currency account rose by 231%YoY.
NPLs improved to 6.5%
The NPLs of the bank increased by 18%YoY to PKR 16.3 Billion which allowed the NPL ratio to stand at 6.5% coupled with the coverage ratio which was at 77% during the period. The bank made the total provisions of PKR 4.5 Billion during the period comparing to PKR 3.2 Billion last year which depicted a massive surge of 41%YoY during the reviewing period. As a proportion of total loan book, exposure to textile declined by 200bpsYoY to 18%, share of sugar was down 63bpsYoY to 1.33% and retail exposure remained flat at 2.5%
Looking Forward
ABL owns enough competence to retain strong bottom-line growth going forward. The bank is targeting to raise its exposure to high yielding SME segment. Moreover, the non-interest income of the bank is expected to remain growing mainly at the back of higher capital gains on its equity portfolio where the bank currently has PKR 2 Billion as un-realized gains. I currently maintain ‘hold’ stance on the ABL’s scrip by considering its FY10E earnings at 6.68x where my target price for FY10 is PKR 69.50 per share.
Monday, April 5, 2010
Banking Sector Spreads 2MFY10 Review
Average deposit rates slipped by 3bps
The State Bank of Pakistan (SBP) has recently released the figures of lending and deposit rates of the banking during the period of 2MFY10. The average deposit rates slipped by 3bps during the period to 6.07% comparing to the last month of the same year while the average lending rates stood at 13.38% from 13.35% during the period by translating 3bpsMoM increase.
Spreads depicted the increment of 6bps
The interest rate spread depicted the increment of 6bpsMoM to 7.31% comparing to 7.25% during last month. Initially, it was continuously in downtrend since the period of 1MFY09 where it recorded its peak of 7.78%.
Fresh loan spread turned down by 7bps
The interest spread on fresh lending vs. deposits witnessed a decline of 14bps to 6.28% while the interest rates on fresh loans turned down by 7bps to 13.46% along with a cost of fresh deposits who jumped by 7bps to 7.18% during the period. This dwindling trend highlights the risk that maintaining the positive momentum in spreads would be a challenge and spreads could face pressure going forward.
6M KIBOR positioned at 12.19% on average
The average 6-Months KIBOR stood at 12.19% during the period due to the continuation of easing the monetary policy stance by the State Bank of Pakistan (SBP). Initially, the rate touched its peak level of 15.67% during 12MFY09.
Looking Forward
I am expecting the interest rate spreads to remain above the level of 7% in FY10 mainly at the back of recovery of inflation which is likely to keep the interest rates stable in short term to consolidate the lending rates while deposit rates are to remain around the same level mainly at the back of imposition of floor of 5% by SBP on CASA accounts. I am currently maintaining the ‘neutral’ stance on banking sector.
The State Bank of Pakistan (SBP) has recently released the figures of lending and deposit rates of the banking during the period of 2MFY10. The average deposit rates slipped by 3bps during the period to 6.07% comparing to the last month of the same year while the average lending rates stood at 13.38% from 13.35% during the period by translating 3bpsMoM increase.
Spreads depicted the increment of 6bps
The interest rate spread depicted the increment of 6bpsMoM to 7.31% comparing to 7.25% during last month. Initially, it was continuously in downtrend since the period of 1MFY09 where it recorded its peak of 7.78%.
Fresh loan spread turned down by 7bps
The interest spread on fresh lending vs. deposits witnessed a decline of 14bps to 6.28% while the interest rates on fresh loans turned down by 7bps to 13.46% along with a cost of fresh deposits who jumped by 7bps to 7.18% during the period. This dwindling trend highlights the risk that maintaining the positive momentum in spreads would be a challenge and spreads could face pressure going forward.
6M KIBOR positioned at 12.19% on average
The average 6-Months KIBOR stood at 12.19% during the period due to the continuation of easing the monetary policy stance by the State Bank of Pakistan (SBP). Initially, the rate touched its peak level of 15.67% during 12MFY09.
Looking Forward
I am expecting the interest rate spreads to remain above the level of 7% in FY10 mainly at the back of recovery of inflation which is likely to keep the interest rates stable in short term to consolidate the lending rates while deposit rates are to remain around the same level mainly at the back of imposition of floor of 5% by SBP on CASA accounts. I am currently maintaining the ‘neutral’ stance on banking sector.
Friday, April 2, 2010
Shell FY09 Review
Earnings tremendously boosted during FY09
Shell Pakistan (SHELL) has recently disclosed its result for the period of FY09. The company posted the NPAT of PKR 3.91 Billion during the period comparing to the NLAT of PKR 1.73 Billion during the same period last year where the EPS during the period stood at PKR 37.42 comparing to LPS of PKR 25.20 during the corresponding period last year mainly at the back of higher exchange and inventory losses during last year.
Higher margins squeezed the Cost of Sales
The company made the sale of PKR 156 Billion during the period comparing to PKR 163.15 Billion during the same period last year which translated 4%YoY decrease during the period. Conversely, the cost of sales nose-dived by 9%YoY to PKR 143.10 Billion during the period due to the drastic surge in crude oil as well refined product prices specially the HSD which permitted the company to incur higher inventory gains. Moreover, the gross profit enlarged by 100%YoY to PKR 12.9 Billion resulting higher margins during the period.
Other income surged by 28%YoY
The further support to the outshine performance was given by other income which surged by 28%YoY to PKR 917 Million against PKR 719 Million during the same period last year chiefly due to distribution of higher profits from Pak Arab Pipeline company Limited (PAPCO) to its associated companies.
TFC issuance led lower financial charges
The distribution and administrative expenses of the company upped during the period by 21%YoY to PKR 7.22 Billion comparing to PKR 5.98 Billion during the same period last year while the financial charges of the company turned down by 53%YoY to PKR 1.29 Billion from PKR 2.71 Billion during the same period last year mainly at the back decrease in interest rates. Moreover, the issuance of TFC of worth PKR 85 Billion by the GoP for resolving the circular debt also supported the decrease in financial charges during the period.
Looking Forward
I currently maintain ‘buy’ stance for the SHELL scrip by considering its current trading at FY10E of 7.50x where my target price for FY10 is PKR 390 per share.
Shell Pakistan (SHELL) has recently disclosed its result for the period of FY09. The company posted the NPAT of PKR 3.91 Billion during the period comparing to the NLAT of PKR 1.73 Billion during the same period last year where the EPS during the period stood at PKR 37.42 comparing to LPS of PKR 25.20 during the corresponding period last year mainly at the back of higher exchange and inventory losses during last year.
Higher margins squeezed the Cost of Sales
The company made the sale of PKR 156 Billion during the period comparing to PKR 163.15 Billion during the same period last year which translated 4%YoY decrease during the period. Conversely, the cost of sales nose-dived by 9%YoY to PKR 143.10 Billion during the period due to the drastic surge in crude oil as well refined product prices specially the HSD which permitted the company to incur higher inventory gains. Moreover, the gross profit enlarged by 100%YoY to PKR 12.9 Billion resulting higher margins during the period.
Other income surged by 28%YoY
The further support to the outshine performance was given by other income which surged by 28%YoY to PKR 917 Million against PKR 719 Million during the same period last year chiefly due to distribution of higher profits from Pak Arab Pipeline company Limited (PAPCO) to its associated companies.
TFC issuance led lower financial charges
The distribution and administrative expenses of the company upped during the period by 21%YoY to PKR 7.22 Billion comparing to PKR 5.98 Billion during the same period last year while the financial charges of the company turned down by 53%YoY to PKR 1.29 Billion from PKR 2.71 Billion during the same period last year mainly at the back decrease in interest rates. Moreover, the issuance of TFC of worth PKR 85 Billion by the GoP for resolving the circular debt also supported the decrease in financial charges during the period.
Looking Forward
I currently maintain ‘buy’ stance for the SHELL scrip by considering its current trading at FY10E of 7.50x where my target price for FY10 is PKR 390 per share.
Thursday, April 1, 2010
Fertilizer Sector 2MCY10 Review
Urea Off-take dwindled by 9%YoY
The National Fertilizer Development Centre (NFDC) has recently announced the fertilizer’s updates for the period of 2MCY10. The Urea off-take witnessed a decent decline of 9%YoY to 984k tons comparing to 1,076k tons during the same period last year mainly at the back of 17%YoY and 16%YoY decline in urea imports and local productions respectively during the period. Conversely, the sector owned the 9%YoY higher sales in terms of increase in urea prices which stood at PKR 814 per bag during the period comparing to PKR 747 per bag during the same period last year.
FFBL supported the Urea’s declining trend
During 2MFY10, Fauji Fertilizer Bin Qasim (FFBL) contributed the major decline of 52%YoY in its urea off-take comparing to the same period last year largely attributable to their plant turnaround while ENGRO witnessed the 2%YoY growth where Fauji Fertilizer Company (FFC) remained unchanged during the period.
DAP off-take showed 42%YoY growth
The DAP off-take remained growing during the period by depicting enormous growth of 42%YoY to 162k tons comparing to 114k tons during the same period last year. The DAP prices also showed a extensive increase of 22%YoY to PKR 2,589 per bag primary due to increase in Phos-acid prices which are currently around USD 610/ton comparing to USD 430/ton during 2HCY09.
ENGRO became the major beneficiary of DAP off-take surge
ENGRO showed the outshine performance during the period by posting 157%YoY growth during 2MFY10 to 41k tons comparing to 16k tons during the same period last year. Moreover, the 230%YoY growth was witnessed on cumulative basis by the company after posting sales of 71k tons during the period. FFBL sales remained deceptive during the period as the company posted the sales of 27k tons by posting 32%YoY reduction during the period mainly at the back of plant turnaround.
Looking Forward
I believe that the fertilizer sector will remain prominent due to the GoP support to agriculture sector by allowing the support prices and subsidized agricultural loans etc. Moreover, the current DAP prices have increased to PKR 2,600/bag due to increase in Phosphoric acid prices which may cause shrinkage to the DAP off-take. Currently, I maintain ‘buy’ stance for ENGRO scrip by considering its current trading at FY10E of 6.50x while ‘hold’ for FFC and FFBL by considering their current trading at 7.80x and 9.50x respectively where my target price for ENGRO, FFC, and FFBL is PKR 250, PKR 120 and PKR 38 per share respectively.
The National Fertilizer Development Centre (NFDC) has recently announced the fertilizer’s updates for the period of 2MCY10. The Urea off-take witnessed a decent decline of 9%YoY to 984k tons comparing to 1,076k tons during the same period last year mainly at the back of 17%YoY and 16%YoY decline in urea imports and local productions respectively during the period. Conversely, the sector owned the 9%YoY higher sales in terms of increase in urea prices which stood at PKR 814 per bag during the period comparing to PKR 747 per bag during the same period last year.
FFBL supported the Urea’s declining trend
During 2MFY10, Fauji Fertilizer Bin Qasim (FFBL) contributed the major decline of 52%YoY in its urea off-take comparing to the same period last year largely attributable to their plant turnaround while ENGRO witnessed the 2%YoY growth where Fauji Fertilizer Company (FFC) remained unchanged during the period.
DAP off-take showed 42%YoY growth
The DAP off-take remained growing during the period by depicting enormous growth of 42%YoY to 162k tons comparing to 114k tons during the same period last year. The DAP prices also showed a extensive increase of 22%YoY to PKR 2,589 per bag primary due to increase in Phos-acid prices which are currently around USD 610/ton comparing to USD 430/ton during 2HCY09.
ENGRO became the major beneficiary of DAP off-take surge
ENGRO showed the outshine performance during the period by posting 157%YoY growth during 2MFY10 to 41k tons comparing to 16k tons during the same period last year. Moreover, the 230%YoY growth was witnessed on cumulative basis by the company after posting sales of 71k tons during the period. FFBL sales remained deceptive during the period as the company posted the sales of 27k tons by posting 32%YoY reduction during the period mainly at the back of plant turnaround.
Looking Forward
I believe that the fertilizer sector will remain prominent due to the GoP support to agriculture sector by allowing the support prices and subsidized agricultural loans etc. Moreover, the current DAP prices have increased to PKR 2,600/bag due to increase in Phosphoric acid prices which may cause shrinkage to the DAP off-take. Currently, I maintain ‘buy’ stance for ENGRO scrip by considering its current trading at FY10E of 6.50x while ‘hold’ for FFC and FFBL by considering their current trading at 7.80x and 9.50x respectively where my target price for ENGRO, FFC, and FFBL is PKR 250, PKR 120 and PKR 38 per share respectively.
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