The benchmark index of Pakistan Stock Exchange (PSX) once
again failed in crossing 50,000 barrier but managed to close at 49,556, ending
its last 10-week bullish run. This slow down could be attributed to rumors of
action by SECP against brokers that were warned recently over compliance issues
primarily related to financing. Activity at the bourse tapered almost
30%WoW with average daily traded volume declining to slightly less than 370
million shares. The volume leaders were: KEL, TRG, DSL, LOTCHEM and ASL. Key
news flows during the week included: 1) GoP initiated the process for sale of
its 18.39% shareholding in MARI at 7.5% discount to the closing market price of
MPCL shares of 27th January this year of Rs1,402.9/share, 2) Sindh
Bank Limited and Summit Bank begun due diligence process for merger, 3) Cabinet
Committee on Privatization (CCoP) deferred the divestment of GoP's 5% stake in
OGDC on the stock exchange until its share price touches Rs200/share, 4) SBP
sold Rs589.7 billion worth of papers at the MTB auction held on 1st
February, where cut off yields on 3, 6 and 12 months increased and 5) GoP
raised prices of petroleum products. Performance leaders for the week were:
LOTCHEM, PSO, EPCL, ENGRO and MTL; while laggards included: APL, FFBL, INDU,
MCB and FATIMA. Foreign participation continued its negative trend with
US$15.31 million outflows compared to US$13.67 million a week ago. Going
forward, the market is likely to take its direction from the ongoing results
season where strong earnings growth by Banks, Cements and Autos is likely to
provide impetus to market performance. Major results announcement next week
includes MCB, ABL, PRL, PTC, CHCC, LOTCHEM and EPCL.
Engro Fertilizer (EFERT) is scheduled to announce its
CY16 financial results on Wednesday 8th February. Analysts expect
the Company to profit after tax of Rs10.79 billion (EPS: Rs8.11) for CY16 as
compared to net profit of Rs15.03 billion (EPS: Rs11.29) for CY15, a fall of
28%YoY. The decline in earnings is expected on the back of: 1) gross margin (GM)
sliding to 33.2% (including subsidy) on account of reduction in urea prices
(down 9%YoY) due to depressed farm economics and low international price down
28%YoY to an average US$213/ton during the year under review, 2) 73%YoY decline
in other income on account of reduction on term deposits and 3) 28%YoY decrease
in finance cost on account of swift deleveraging and low interest rate
environment. However sequentially, analysts expect an increase of 79%QoQ in
profit to Rs5.13 billion (EPS: Rs3.86) for 4QCY16 on the back of 61%QoQ growth
in topline to Rs30 billion due to the increase in urea/imported DAP offatke to
630,000/292,000 tons due to Rabi season. Along with the result analysts expect
a cash dividend of Rs2.50/share that could take full year payout to Rs6.9/share.
Pakistan’s largest oil marketing company, Pakistan State
Oil (PSO) is scheduled to announce its 1HFY17 result on 6th February
where analysts expect it to post earnings of Rs9.67 billion (EPS: Rs35.61)
marking an increase of 44%YoY led by 1) inventory gains of Rs1.2 billion (Rs4.42/share)
as against inventory losses of Rs0.91 billion (Rs3.39/share) for 1HFY16, and 2)
a 20%YoY growth in overall volumes.
A rather smaller company, HASCOL is also scheduled to
announce CY16 earnings of Rs1.31 billion (EPS: Rs10.84) up 15%YoY, where the
normalization of taxes is likely to erode profitability significantly.
Staggered rise in global oil prices and increase in HSD/Mogas retail prices,
with a 13% fall in additional levies translate into higher prescribed price
pass through (increasing 6.5%). On quarterly basis, 4QCY16 earnings are
expected to grow by 6%YoY to Rs404 million led by 46%YoY growth in total
volumes. Full year earnings are likely to be accompanied by a final dividend of
Rs3.00/share that could take full year payout to Rs6.5/share.
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