Pakistan Stock Exchange (PSX) continued its bearish
momentum during the week ended 28th October 2016. The sentiments were driven by
rising political uncertainty over 2nd November PTI protest and lower international
oil prices. The benchmark Index slipped below 40,000 mark and close at 39,873,
down by 3.44%WoW. The average daily trading volumes for the week declined to 341.2
million shares, down by 27.7%WoW.
The key news flow during the week included: 1) China's
Baosteel Group expressed its interest in acquiring PSM, 2) GoP expressed
intentions to disallow dedicated gas supply from new discoveries to 4 fertilizer
plants, including EFERT during the upcoming winter season, 3) Sindh High Court allowed
benefit of SRO 1125/2011 to spinning mills at the rate of zero percent on the
import of raw cotton, 4) GoP raised Rs90.2 billion though Treasury Bills auction,
where cut off yield for the 3-months were raised while yields on 6 and 12 month
Bills remained stable and 5) IMF Chief Christine Lagarde during her visit praised
Pakistan for emerging from an economic crisis to a stabilizing economy.
Volume leaders for the week were BOP, KEL, TRG, PACE and
PIAA. While gainers were: MLCF, FCCL, PIOC and ICI, laggards included: SHEL, ASTL,
LOTCHEM and PSMC. Foreigners emerged net buyers with net inflow amounting to
US$14.1 million as compared to net outflow of US$8.46 million a week ago. With
result season nearing its end, analysts expect market sentiments to be driven
by political developments ahead of PTI protest. Furthermore, escalation in
cross border tension and domestic security concerns can add further pressure.
However, textile sector may come into limelight upon expected announcement of
the export package worth Rs75 billion by the GoP. On the global front, OPEC
countries are scheduled to meet in November to discuss details over output
freeze/cut. The outcome can impact oil prices and performance of companies listed
at PSX accordingly.
Recent developments with regards to upgraded fuel
quality, volumetric sales dynamics and long term competitive dynamics were
discussed at PSO's 1QFY17 analyst briefing session. To recall, the OMC posted
earnings of Rs4.38 billion (EPS: Rs16.11) for the quarter, where growth of
35%YoY was led by inventory gains of Rs1.0 billion (R3.68/share) as compared to
a small loss in the comparable period last year. Overall, PSO: 1) lost market
share (56.5% currently) due to losing out on white oil segment growth, 2)
benefitied from higher margins (HSD and Mogas), lower Mogas cost of supply, 3)
provisioning for receivables from PIA of Rs300 million (on gross receivable of Rs15
billion) and, 4) absence of late payment income from IPPs where power sector
receivables of Rs162 billion remain unresolved. Having the footprint PSO does,
it cannot take part in inventory curtailment or limit supply, but has to follow
a strict system of procurement.
FATIMA has posted unconsolidated profit after tax of Rs3.9
billion (EPS: Rs1.62) for 3QCY16 as compared to net profit of Rs612 million
(EPS: Rs0.29) for 3QCY15. Key highlight of the result includes: 1) strong growth
in topline to Rs10.13 billion caused by increase in Urea, CAN and NP offtake,
post subsidy in budget FY17, 2) decline in gross margin due to weak domestic
Urea/CAN/NP prices and 3) dealer discounts to clear out high inventory levels.
On a cumulative basis, 9MCY16 earnings declined to Rs6.37 billion (EPS: Rs3.03)
compared to Rs7.45 billion (EPS: Rs3.55) for 9MCY15, down 15%YoY on account of
unprecedented adverse market conditions caused by weak farm economics and
delayed implementation of subsidy on urea by the GoP.
LUCK announced its 1QFY16 results posting profit after
tax of Rs3.24 billion (EPS: Rs10.01) as compared to Rs2.97 billion (EPS: Rs9.18)
for 1QFY16. The reported earnings were higher than expected of owing to: 1)
higher than expected topline resulting from 0.145 million tons clinker sales
during the period and 2) improvement in gross margin due to cheaper coal
inventories. Result Highlights included: 1) topline growth due to higher
dispatched, 2) improvement in gross margin, 3) addition of 5MW WHR, 4)
substitution of exports by domestic sales, 5) reduction in distribution cost
owing to decline in export dispatches, 6) other income rising jumped due to
interest income on higher cash balances, and 7) effective tax rate of 30%.
