Stock Market At A Glance.
The market started the week on a bearish note but propelled forward in the remaining sessions in line with most global markets, which also gained during the week. KSE-100 ended the week up 2.6% WoW and closed at 33,843pts. ADTO was down 2% WoW to 178mn shares. The average daily value traded decreased 8% to US$101mn. FIPI recorded at an outflow of US$19.7mn this week vs an inflow of US$0.22mn last week. Oil and gas sector remained keenly in focus following the recovery in oil prices of late (up 18% this week).
The sixth IPO of the year 2015 commenced this week as the book-building of Amreli Steels Ltd concluded on a strong note, oversubscribed by 2.5x. On fertilizers front, final decision on urea price cut is yet to be clear as most manufacturers failed to abide by the agreed reduction in urea prices. OGRA fixed provisional price for imported LNG at US$8.64/mmbtu, fixing PSO's margin at 1.82% of Delivered Ex-Shipment price. The IMF released its detailed Eighth Review report of Pakistan's economic performance, adding positively to the sentiments as outlook on macro indicators, particularly external account, remained strong. Importantly, the fiscal commitments made on addressing power sector issues and containing the fiscal deficit, show the government's intention of continued progress on reform agenda. Discussions between the IMF and Pakistan authorities for the next quarter review are slated for October 26th to November 6th, whereby the performance against end Sep-15 targets will be reviewed.
With the Senate Standing committee on Finance approving the long-standing SBP Amendment Bill, the final approval by Senate is expected to fulfill an already delayed key structural benchmark under the IMF program.
Amidst lack of other major triggers, the market is likely to look forward to the Sep-15 quarter result season which is soon to kick off; though only a few big tickets to announce results next week. The recovery in oil prices is set to bring oil stocks back in the limelight, where EandPs remain steeply undervalued. Our top picks in KASB Universe include LUCK, DGKC, ENGRO, EFERT, UBL, POL, PPL, PAEL, OGDC, and ICI.
NEWS THIS WEEK
Ministry decides to amend power policy 2015
As per reports, Ministry of Water and Power is going to amend Power Policy 2015 taking into account the questions raised by the provincial governments of Sindh and KPK previously. New power policy will offer enhanced incentives and will bridge the gap between supply and demand by generation of inexpensive electricity for socioeconomic progress of the country.
IMF's eff: ninth review meetings from Oct 26th to Nov 4
Pakistan and the International Monetary Fund (IMF) are to hold the ninth mandatory review meetings under Extended Fund Facility (EFF) arrangement from Oct 26th to Nov 4th in Dubai. At the initial stage, technical level talks will be held between the IMF staff and Finance Ministry-led officials and later Finance Minister Ishaq Dar and Governor State Bank of Pakistan will join the meetings.
Cement export plunges 27%
Total cement dispatches fell 6.35% YoY in Sep-15, as exports fell by 36% to 467k MT (down 36% in both north and south) while local dispatches improved by 2.5% to 2.48mnMT. Domestic cement dispatches in south fell to 399,581 MT in Sep-15
Ogra fixes provisional price of imported lng
OGRA fixed provisional price for imported LNG at US$8.64/mmbtu on Wednesday, taking into account Pakistan State Oil (PSO)'s application. The gas prices includ Delivered Ex-Shipment (DES) price at US$7.73/mmbtu and US$0.0088/mmbtu as PSO's other import related cost, US$0.66/mmbtu as terminal tolling charges, transmission and distribution losses at US$0.034/mmbtu and PSO's margin at US$0.14/mmbtu.
Senate body approves SBP amendment bill 2015
The Senate Standing Committee on Finance on Thursday approved State Bank of Pakistan (SBP) (Amendment) Bill 2015 for granting autonomy to the central bank whereby senators asked the government to include parliamentarians into monetary policy committee (MPC) who fulfill fit and proper criteria.
THIS WEEK'S TOP STORIES
MONDAY, OCT 5, 2015 PPL - RIVETING PROSPECTS TINGED WITH ATTRACTIVE VALUATION; BUY
- We reiterate our Buy rating on PPL and maintain our PO at PRs183 (48% upside). We have tweaked our FY16/17E EPS by -4%/5% to PRs17.37/19.68 on new production estimates.
- In our view, the market has overestimated PPL's sensitivity to oil prices and broadly overlooked the positives: Sui Mining Lease extension, conversion of gas prices, and PPL's successful efforts at ramping up production.
- The stock trades at an astounding implied oil price of US$15 (an overly pessimistic scenario, in our view). News flow on exploration efforts and gas price conversion will help to lower discount.
MUHAMMAD SAAD ALI, CFA
TUESDAY, OCT 6, 2015 HUBCO- STEADY PROGRESS ON KEY PROJECTS; REITERATE BUY
- From our discussions with Hubco's management, we understand the company is making steady progress on key projects, albeit the financial close of the expansion project will likely materialize before June 2016.
- Other updates: (1) taking over OandM base plant is earnings positive; (2) cash flows are improving amid moderating circular debt; (3) Laraib's tariff is yet to be finalized; and (4) cash settlement with FBR is also due.
- We reiterate our Buy rating on Hubco with an unchanged PO of PRs102 (total return 11%).
MUHAMMAD SAAD ALI, CFA
WEDNESDAY, OCT 7, 2015 AMSL -POSITIONED FOR QUALITY; POSITIONING FOR GROWTH; SUBSCRIBE (PO OF PRS44.5)
- We assign a "Subscribe" recommendation for IPO of Amreli Steels Limited (AMSL), Pakistan's largest producer of steel rebar. We value AMSL at PRs44.55 (DCF method) suggesting 86% upside to floor price.
- Key investment consideration includes (1) an energy efficient project allow AMSL to increase its market share sustainable cost advantage, (2) favorable demand dynamics and government policies and (3) quality perception supporting pricing premium and superior margin.
- Four key risks to watch out for are; (1) delay in project delivery and cost over-run, (2) supply of scarp and its prices, (3) adverse exchange rate movement, and (4) supply of power from third party.
THURSDAY, OCT 8, 2015 IMF 8TH REVIEW- EMPHASIS ON GROWTH; ENERGY SECTOR MORE CRUCIAL
- Details from the recently published report on IMF Eighth Review indicate prospects of continued progress on reforms agenda, including potential compliance in performance criteria for end of Sep-15 review.
- Most macro forecasts remain unchanged, while external sector outlook is improved. Political statesmanship is likely to gain vital role in delivery of many targets in coming months, including privatization and legal reforms.
- Market implications, while limited in the near term, include (1) focus on state-owned energy stocks, power equipment supplier like PAEL, EandPs likely to gain traction and (2) marginally negative for banks as potential monetary easing view intact even as government has committed to keep a clear cut positive real interest rate.
FRIDAY, OCT 9, 2015 ICI - PSF DUTY HIKE ALLAYS A MAJOR RISK; RAISE PO TO PRS593
- We have raised our PO for ICI by 4% to PRs593 and upgrade our FY16/17E EPS by 4/3% to PRs39.14/47.63 led by higher antidumping duty imposed on PSF imports. Reiterate Buy.
- Our estimates revision is modest because: we had already incorporated recovery in PSF losses; and the scenarios in the regional polyester/domestic textile markets are still quiet bleak.
- Soda Ash segment is enjoying sales/margins growth in line with our expectations. Life Sciences segment has benefited from new product launches.
MUHAMMAD SAAD ALI, CFA
STOCK MARKET SYNOPSIS
###LAST WEEK###THIS WEEK###% CHANGE
Mkt. Cap (US$bn)###67.6###69.3###2.5%
Avg. Dly T/O (mn. shares) 178.1###175.1###-1.7%
Avg. Dly T/O (US$ mn.)###39.1###91.6###134.3%
No. of Trading Sessions###5.0###5.0###-
KSE 100 Index###32,969.7###33,843.2###2.6%
KSE ALL Share Index###23,070.8###23,673.8###2.6%