The Government of Pakistan (GoP) intends to sell
shares of Oil and Gas Development Company, (OGDC) through secondary offer.
It is sale of 10 percent or 322 million shares of its holding. The
move will enhance OGDC’s free float from the present 15% to 22.5%. With the
reported aim of raising US$800 million from the transaction, OGDC’s indicative
offer price comes to PkR 248/share. While the final floor price is yet to be
decided, a discount cannot be ruled out going by the size of the
offer. For details visit shkazmipk.com
Tuesday 23 September 2014
Saturday 20 September 2014
State Bank of Pakistan Keeps Policy Rate Unchanged
The State Bank of Pakistan (SBP) has decided to keep the
policy rate unchanged at 10.0 percent. The decision was taken by the Central
Board of Directors of SBP at its meeting held under the chairmanship of
Governor Ashraf Mahmood Wathra in Karachi Saturday. Policy vigilance requires
balancing the tradeoffs between ensuring the continuation of macroeconomic
stability, especially in the external sector, and assuaging the fallout of
potential damages due to floods. Therefore, the Board of Directors of SBP has
decided to keep the policy rate unchanged.
The post July monetary policy decision period continued to
witness stable macroeconomic conditions. This was most visible in the headline
variable of inflation that declined to 7.0 percent YoY in August 2014, the lowest
level since June 2013. Moreover, after recording an improved 4.1 percent growth
rate in FY14, real economic activity is expected to continue in FY15. The other
highlight of this stability is the gains on fiscal liberalization, shrinking
budget deficits, contained government borrowings and improved debt profile.
Following on the actual number of 8.6 percent in FY14, the
average CPI inflation during Jul-Aug 2014 was recorded at 7.4 percent. This
declining trend is broad based since both measures of core inflation, Non-Food
Non-Energy (NFNE) and trimmed mean, also decelerated YoY to 7.8 percent and
7.14 percent in August 2014 as compared to 8.7 percent and 7.9 percent in June
2014, respectively. Although, actual low inflation might weigh positively on
market sentiments, it is the future path of inflation that matters for monetary
policy decision. The current outlook of around 8 percent average CPI inflation
for FY15 might change adversely if the subsidy to electricity is cut and Gas
Infrastructure Development Cess is levied.
After demonstrating low growth since 2008, real economic
activity started to show signs of revival in FY14. Continuation of the current
growth momentum, however, primarily hinges on agriculture productions in FY15.
This is because Large Scale Manufacturing (LSM) growth might remain constrained
due to continued energy shortages; reduced production capacity of independent
power plants; low supply of gas to fertilizer plants; lower domestic and
international prices in the sugar sector; and higher inventories and slower
exports growth prospects in food and textile sectors, respectively.
Incorporating the latest trends in exports and imports, oil
payments in particular, trade deficit is going to dominate the composition of external
current account deficit, even with a healthy growth in workers’ remittances.
Declining private capital inflows, foreign direct investments in particular,
would present continued challenges in managing the balance-of-payments
position. In this regard, realization of expected privatization receipts and
issuance of dollar-denominated Eurobond/Sukuks would be important.
In addition to the risks identified above, ongoing political
impasse, delay in the finalization of fourth IMF review, and the current heavy
rains and floods, which have engulfed central and southern Punjab, threaten the
nascent recovery in economic activity. The former two would weigh more on the
private capital inflows. The latter can potentially disrupt the output and
supply chain of the perishable food items, which challenges an otherwise benign
inflationary outlook. While it is going to take some time before the full
extent of damages arrive, initial opinions and past experiences suggest that
the current floods would damage some khariff crops and may disrupt supply chain
temporarily. Besides having implications for economic growth, floods can also
create macroeconomic imbalances by putting pressures on fiscal and external
sector. Moreover, supply of loanable funds in the credit to private sector
market may also be adversely affected, at least initially. Reflecting these
apprehensions indeed, there is deterioration in SBP-IBA’s Consumer Confidence
Survey of September 2014 as well.
Tuesday 16 September 2014
Pakistan: Initial Public Offering by Engro Powergen
Scheduled to
become the latest addition to Pakistan’s listed power companies, Engro Powergen
Qadirpur Limited (EPQL) will be formally listed on October 27, 2014 after an initial
public offering (IPO) of 40.475 million shares (12.5% of total paid up capital)
at PkR30.02/share. The unique hallmark of the 225MW plant (net 217.3MW)
includes utilization of flare gas from Qadirpur gas field, which insulates it
from gas shortages being faced by other independent power plants (IPPs).
This allows EPQL to more fully benefit from the cost efficiency of a combined cycle plant. EPQL posted profit after tax of PkR1.09 billion (EPS: PKR3.36) for 1HCY14, up by 4%YoY. At the same time, interim 1HCY14 dividend stood at PkR1.54/share. On an annualized basis, this translates into an attractive P/E of 6.72 and offering dividend yield of 10% which compared well against a forward P/E of 9.85 for LPL and D/Y of 12% and 12.8% for HUBC and KAPCO, respectively. .
For CY13, EPQL posted net profit of PkR1.01 billion (EPS: PkR4.5), lower by 31%YoY due to a rotor blade fault that shut the plant down for 95 days. That said, the full-year CY13 dividend was PkR6.17/share, following the circular debt repayment last year.
This allows EPQL to more fully benefit from the cost efficiency of a combined cycle plant. EPQL posted profit after tax of PkR1.09 billion (EPS: PKR3.36) for 1HCY14, up by 4%YoY. At the same time, interim 1HCY14 dividend stood at PkR1.54/share. On an annualized basis, this translates into an attractive P/E of 6.72 and offering dividend yield of 10% which compared well against a forward P/E of 9.85 for LPL and D/Y of 12% and 12.8% for HUBC and KAPCO, respectively. .
EPQL was set
up under the 2002 Power Policy and operates a 225MW combined cycle, gas and HSD
fired power plant in Qadirpur, Sindh. The Company has a 25-year power purchase
agreement (PPA) with NTDC commencing from Mar 27'10 (COD), and a Fuel Supply
Agreement (FSA) with SNGP/OGDC for running the plant on unsweetened flare gas
(75mmcfd) from the second largest gas field of Pakistan. This is underpinned by
an average load factor of 85% over 2011-13, which improved to 95% in 1QCY14
following turbine repairs in 4QCY13.
EPQL posted
NPAT of PkR1.09 billion (EPS: PkR3.36) for 1HCY14, up by 4%YoY (increase in
other income by PkR148 million YoY). It paid interim dividend of PkR1.54/share for
1HCY14 stood at adding PkR552 million to unappropriated profit).For CY13, EPQL posted net profit of PkR1.01 billion (EPS: PkR4.5), lower by 31%YoY due to a rotor blade fault that shut the plant down for 95 days. That said, the full-year CY13 dividend was PkR6.17/share, following the circular debt repayment last year.
A total of
80.95 million shares are being offered (inclusive of 40.47 million shares under
pre-IPO placement through institutional investors). Priced at PkR30.02/share,
this issue will help in raising an amount of PkR2.43 billion. The purpose of
the issue is ostensibly to pay-off liabilities incurred by EPL for project
financing and finance new projects including the LNG terminal being constructed
by ENGRO subsidiary, Elengy Terminal Pakistan Ltd.
Compared to
Lalpir Power Ltd (LPL), a recently listed IPP of similar capacity, EPQL's
implied valuation multiples at PkR30.02/share. Furthermore, EPQL stacks up well
on payouts as well with a CY14E dividend yield of 10% as compared to a forward
dividend yield of 12% for HUBC and 12.8% for KAPCO. In this regard, HUBC and
KAPCO trade at a forward P/E of 10 and 7.35, respectively. A consistent payout
ratio of 50% (ex-CY13 payout of 137% due to circular debt payment) and a
consistent 31% average ROE over 2011-13 would encourage investors to buy its
sharesWednesday 20 August 2014
National Bank of Pakistan posts 28 per increase in net profit
On Tuesday
the Board of Directors of National Bank of Pakistan (NBP) approved financial
results of the Bank for the six months period ended June 30, 2014, posting 42
percent increase in net earnings.On a consolidated basis, NBP has posted profit after tax of PkR7.67 billion (EPS: PkR3.60) for 1HCY14 against restated net profit of PkR6.01 billion (EPS: PkR2.83) for 1HCY13, translating into 28%YoY growth.
Had last
year’s accounts not been restated (changes to share of associates’ profit and
admin expenses), growth would have tapered to 11%YoY. The result was above
expectations with the deviation due to higher than expected Net Interest Income
(NII) and exceptionally high capital gains.
Key 1HCY14
result highlights include: 1) a 2%YoY reduction in NII, 2) a 66%YoY reduction
in total provisions, 3) a 13%YoY non-interest income growth largely due to
capital gains and 4) a 12%YoY increase in non-interest expenses.
For 2QCY14
alone, NBP posted net profit of PkR4.44 billion (EPS: PkR2.09), up
79%YoY/38%QoQ making this the best quarter since 1QCY12. Capital gains for the
quarter rose to PkR3.83 billion, one of the highest on record which together
with a sequential spike in NII, enabled total income to register at record high
levels. Despite the high capital gains, deferred tax pushed the overall tax
rate for 2QCY14 to 39.3%.
The Bank is
strongly capitalized with capital and reserves of PKR 160 billion, which
translates into break- up value per share of over PKR 75 per share. The bank’s
rating was re-affirmed at “AAA” by JCR VIS Credit Rating Agency in June 2014.
At current
levels, the target price of PkR65/share implies an accumulate stance. That
said, investors must revisit detailed accounts where asset quality position
would be critical.
Sunday 17 August 2014
Pakistan: POL earnings up by 19 percent
Pakistan Oilfields Limited (POL) announced its FY14 result posting profit after tax of PKR12.9 billion (EPS: PKR54.5), a growth of 19%YoY. The result was below market expectations due to higher than estimated amortization charges, primarily due to Manzalai reserve downgrade write-off. The result announcement was also accompanied by a final cash dividend of PKR32.5/share taking full year payout to PKR52.5/share. The notable surge in earnings during FY14 can be attributed to a 23% increase in the topline to Rs35.5 billion on account of 1) a 25%YoY increase in oil production to 6,000bpd and 2) a 6.3%YoY depreciation in average Pak Rupee value against the US Dollar. Analysts maintain BUY stance on POL with a target price of PKR655/share, offering a total return of 29%.
Friday 15 August 2014
Attock Petroleum posts full year results, EPS up 11 percent
Attock Petroleum Limited (APL) posted profit after tax of
PKR4.3 billion (EPS: PKR52.2) for FY14 (financial year ended June 30, 2014) as
compared to PKR3.9 billion (EPS: PKR47.1) for the corresponding period last year,
depicting a growth of 11 percent YoY.
The result was below expectations due to higher than estimated inventory losses in 4QFY14.
The increase in earnings can be attributed to a) 18% higher volumetric sales of major petroleum products, b) increased margins on HSD and motor gasoline and c) lower late payment charges.
The announcement was also accompanied by final dividend of PKR30/share, taking full year FY14 payout to PKR47.5/share.
At current levels, analysts maintain ‘accumulate’ stance on APL with a trade price of PKR625/share, offering a total return of 15 percent.
The result was below expectations due to higher than estimated inventory losses in 4QFY14.
The increase in earnings can be attributed to a) 18% higher volumetric sales of major petroleum products, b) increased margins on HSD and motor gasoline and c) lower late payment charges.
The announcement was also accompanied by final dividend of PKR30/share, taking full year FY14 payout to PKR47.5/share.
At current levels, analysts maintain ‘accumulate’ stance on APL with a trade price of PKR625/share, offering a total return of 15 percent.
Wednesday 13 August 2014
OGDC discovers gas near Karachi
Oil and Gas Development Company (OGDC) has discovered hydrocarbon
reserves in exploratory well Pasakhi deep well-4 in Hyderabad district, some
200 kilometers from mega city Karachi. The oil and gas giant has 100 per cent
working interest in Pasakhi lease.
“The structure of Pasakhi deep well-4 was delineated, drilled
and tested using OGDC’s in-house expertise. The well was drilled down to the
depth of 3,460 meters, targeting to test the hydrocarbon
potential of massive sands of lower Goru formation where the Company hit on the
hydrocarbon reserves.
According to the information made public by OGDC the zone
had been tested with 14.015 mmscfd of gas and 125bpd of condensate at 36/64inch
choke size.
“This discovery of hydrocarbon in Pasakhi deep well No 4
will add to the total hydrocarbon reserves base of OGDC.
Analyst Mohammad Affan Ismail at a local brokerage house,
BMA Capital commented that the discovery, which stands at 14.02mmcfd of gas and
125bpd of oil would slightly impact the Company’s annualised earnings.
According to Pakistan Petroleum Information Service (PPIS),
the E&P giant ‑ OGDC ‑ is further pursuing exploratory drilling of seven
more wells (four wells were near completion) mainly in gas rich Sindh and
Balochistan regions.
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