STOCK MARKET AT A GLANCE.
The local bourse started the shortened week on a positive note where the benchmark KSE? 100 index surpassed the 11,000 barrier after two years but failed to sustain that level, ending the week at 10,874 the mark; marginally down WoW. Volumes too tapered off towards the second half of the week but the healthy volumes on the first two days meant that average volumes for the week were still 35% higher WoW at 166mn shares. Macro newsflow dominated the week with 1) CPI clocking in 15.33% YoY during Oct-10; 2) remittances, totaling US$3.5bn for 4MFY11 up 13.22% YoY, and 3) trade deficit, which narrowed by 11.7% YoY in Oct to US$1.2bn.
In addition the cabinet forwarded for parliament approval, a raft of taxation measures to address fiscal strain and meet IMF conditions for release of the pending US$1.7bn tranche. The measures included 1) implementation of reformed GST, 2) flood surcharge of 10% and 3) increase in SED from 1% to 2%. A smooth passage of the bill and effective implementation of the same will remain on the KSE's radar screen in our view.
OUTLOOK FOR THE FUTURE
Heading into another shortened week (only two trading days before Eid holidays), activity could remain muted at the bourses in our view. Macros are likely to remain in focus, where in addition to the progress on RGST, the fate of the IMF tranche will garner attention, given its importance to other pending flows and potential follow through impact on monetary policy due at the end of the month. Our top picks remain intact where POL, PPL, Hubco, PSO and APL are our picks in the energy theme while Engro Corp, Indus Motors UBL, Lucky Cement and Pak Telecom feature in our preferred domestic demand plays. We also continue to strongly recommend LOTPTA as play on robust primary margins.
Monday, Nov 08, 2010
OGDC; MANAGEMENT MEETING HIGHLIGHTS
* We believe the risk of delays to OGDC's development projects stands reduced owing to the commitment of the new MD and senior management.
* That said, inter-corporate debt has strained company's balance sheet. As a result, OGDC is exploring different options to leverageup.
* We think recent appointments of Chairman and MD should give stability at the top, a big relief in the back-drop of five changes in MD and three in Chairman in the last twelve months.
* We maintain U/P rating given rich valuation (22% premium to NAV) and low payout capacity.
MOHAMMAD FAWAD KHAN, CFA (Fawad.email@example.com)
Wednesday, Nov 10, 2010
INDUS - UPGRADING TO BUY ON STRONGER VOLUMES
* We upgrade our rating on Indus to Buy from Neutral and raise our PO to PRs273/sh (up 5%). We also raise FY11-12E EPS estimates by 1.4?6.0%. Our optimism stems from stronger sales outlook and continuing pricing power.
* We are raising FY11E unit sales estimate to 50k-unit (?5% YoY from ?11% YoY previously). In the near term, advances and demand from cotton belt should raise 2Q unit sales by 5% YoY.
* Indus has expectedly increased prices by ~4% in two phases; though its impact on margins will be visible from 3QFY11E due to delivery period of ~1.5 months.
* Indus trades at FY11E P/E and EV/EBITDA of 6.9x and 2.9x, and offers 16% upside and 6% D/Y at current price of PRs234/sh.
* While we see materialization of new mid-term industry program as key upside, (1) Govt allowing commercial imports of used vehicles at relaxed terms and lower tariffs and (2) Yen volatility remain key downside risks.
MUHAMMAD SAQIB SAJJAD (Saqib.firstname.lastname@example.org)
Thursday, Nov 11, 2010
NBP - REVISING ESTIMATES and PO, U/P MAINTAINED
* NBP posted below consensus earnings of PRs8.45/sh in 9M10. YoY earnings depicted an upbeat jump of 21% in 9M10 however adjusting for 3Q09 restatement; it was lower at 13% YoY.
* The broader theme so far in 9M10 remains intact i.e. declining provisions driving earnings. Asset book contracted by 8% QoQ whereas deposits by 9% QoQ. NPLs on the other hand increased by PRs6bn QoQ n highest run rate since 4Q08.
* We tweak key earning drivers i.e. margin and credit costs upward which changes our estimates nominally (1?5%). Spread income is likely to head up but so would credit costs in our view, compared to our previous estimates.
* We have lowered our PO slightly by 3% to PRs64/sh post increase in capital costs. We maintain our Underperform rating trading at 0.7x 2010E NAV as we think operating performance drag is likely to keep RoE<14% in 2011E.
HAMZA A. MARATH, CFA (Hamza.email@example.com)
Friday, Nov 12, 2010
AUTOS - VOLUMES REMAIN ROBUST, QUESTIONS ON COSTS
* The latest auto sales data (up 11.5% YoY and 17% MoM in Oct-10) depicts a resilient sales trend and sequential improvement, despite scare from floods and start of seasonally weak demand period.
* Unlike broad-based performance in past few months, LCVs led the pack in Oct?10 with 59.7% YoY growth while car sales remained muted (up 2.6% YoY).
* We believe that, unless recent stability/depreciation in Yen and GST reforms provides some breathing space, other automakers will have to follow Indus in raising prices to counter cost-side pressures.
* We have recently revised FY11E sales forecast to 135k-units (-5% YoY from previous -10% YoY) and see windfall to cotton farmers as the next trigger.
* We prefer Indus (upgraded this week to Buy: PO PRs273/sh), due to its strong pricing power and robust volumes outlook, over PSMC (U/P: PO PRs64/sh).
MUHAMMAD SAQIB SAJJAD (firstname.lastname@example.org)
STOCK MARKET SYNOPSIS
.###LAST WEEK###THIS WEEK###% CHANGE
Mkt. Cap (US$bn)###34.77###34.85###0.23%
Avg. Dly T/O (mn. shares)###123.20###166.14###34.85%
Avg. Dly T/O (US$ mn.)###52.36###70.63###34.89%
No. of Trading Sessions###5###4###.
KSE 100 Index###10,882###10,874.02###?0.07%
KSE ALL Share Index###7,562.1###7,561.19###?0.01%