During week ended 18th March benchmark PSX-100 Index gained
411 points or 1.126%WoW to close at 33,080 points. The rally was driven by two
factors: 1) corporate restructurings (divestments in EFOODS, EFERT, and
acquisition of NIB) and 2) crude oil prices registering upward move. Material disclosures
of corporate actions by ENGRO were received positively by investors. Foreign participation
failed to sustain the trend (US$4.1 million inflows) witness a week ago where
net outflows during the week amounted to US$7.6 million.
Key news flows for the week were: 1) US Fed maintained interest
rate policy, while expressing concerns about global economic outlook adopting a
dovish stance on future rate hikes, spurring performance in emerging market equities,
2) GLAXO announced details of its Sindh High Court approved divestment of its Consumer
Health Care operations, with investors getting 10 shares for every 3 shares
held in the parent entity, 3) HTL expressed its intention to apply for an OMC
license from OGRA expanding into the retail fuels segment, 4) Auto Policy
dominated news reports with conflicting details regarding greater incentives
for domestic assemblers and, 5) National Assembly passed the Futures Market
Bill, 2015 and Financial Institutions (Recovery of Finances) (Amendment) Bill,
2015 in a bid to promote investment avenues and facilitate recovery of bank
loans.
Stocks exhibiting strong performance during the week
included PPL, INDU, UBL and 4) KEL; conversely laggards were BAFL, HMB, MEBL and
HCAR. Average daily turnover was down by a mild 4.76%WoW closing at 166.8 million
shares. The volume leaders were NIB, KEL, BOP and TRG.
Approval of the Auto Policy (which has experienced its fair
share of delays) may spur performance if planned incentives to current players
are enacted. Strengthening commodity prices boosted largely by weakness in the
US$ (Dollar Index down 1.8%WoW) are expected to follow through in the coming
week. The central bank is scheduled to issue Monetary Policy Statement next week
where a further easing remains unlikely.
Despite tapering input costs improving liquidity, burdensome
overdue receivables in the power sector continue to plague HUBC's balance
sheet, signified by: 1) Rs66.9 billion in overdue receivables from WAPDA &
NTDC, down 18.6%YoY but up 6.4%QoQ, 2) increased reliance on short term
borrowing where a 46.4%YoY and 57.3%QoQ jump in short term borrowing was
witnessed during 1HFY16 and 3) decline in receivables failing to keep pace with
declining revenues, raising Days Receivables to 271 days vs. 211 days for the
corresponding period last year. On the other hand, a slide in payables (overdue
payables to PSO recede 26.5%YoY, rising 6.8%QoQ) has improved the current ratio
slightly. That said, income from Laraib and PCE + Bonus payments from the base
plant continuing to drive payouts (making up Rs4.24/share of the Rs4.5/share
payout declared in 1HFY15). Upcoming payments for new ventures include outlays
for 660x2MW coal fired expansion and acquisition of 9.6% stake in SECMC, and a
two month time period provisioned between receipt of term sheet from lenders
and declaration of financial closure, analysts expect initiation of equity outflows
worth Rs5.87 billion (at 49% equity stake on 80:20 leverage) from 1QFY17.
