Pakistan Weekly Update - Aug 2016

Transcription

1. Market Monitor Pakistan Weekly Update REP-039 www .jamapunji.pk KSE-100: Volatility set in at futures roll over week 40200 26 August 2016 40000 KASB Research research@kasbsec.com KASB Securities Limited Tel: (9221) 111-222-000 39800 39600 39400 39200 39000 38800 Monday Tuesday Wednesday Thursday Friday Source: KSE Stock Market Overview Index closed the week at 39,926.7pts, up 1.1% WoW. Roll-over week and volatility in oil kept the index in-check initially where investors preferred cherry picking, however, the market rallied strongly towards the end of the week, given oversold condition, especially in cement sector. Nevertheless, foreigners remained net buyers during the week, where Foreign Institutional Portfolio Investment (FIPI) witnessed an inflow of US$1.9mn vs UD$18.38mn outflow last week, whereas the average volume traded increased by 0.6% WoW and the average value of shares traded decreased by 21.7% WoW Murree Brewery, International Steel Limited, Service (Shoes) Industries, Allied Rental Modaraba and Sui Northern Gas Ltd were the major gainers while Habib Metro Bank, Ibrahim Fibers, Shell Pakistan, Shifa Int Hospitals Ltd, and IGI Insurance were the major losers in the benchmark KSE-100 this week. News This Week Current account deficit surges 152% in July Reserved clocked in at US$23.1bn FTA talks with Indonesia: Pakistan sets condition Textile exports down 4% in Jul-16 Formula for the subsidy on Urea and Dap finalized Refer to important disclosures on Page 2 Page 1
2. Pakistan Weekly – Aug 26, 2016 KSE-100: Volatility set in at futures roll over week Date 22-Aug-16 23-Aug-16 24-Aug-16 25-Aug-16 26-Aug-16 Open 39,532 39,404 39,418 39,525 39,824 High 39,543 39,618 39,545 39,867 39,950 Low 39,254 39,363 39,362 39,507 39,792 Close 39,458 39,400 39,507 39,792 39,927 Change -0.1% -0.1% 0.3% 0.7% 0.3% Vol (mn) 186 174 140 298 362 Source: KATS Market Review Index closed the week at 39,927pts, up 1.1% WoW. Roll-over week and volatility in oil kept the index in-check initially where investors preferred cherry picking, however, the market rallied strongly towards the end of the week. Nevertheless, foreigners remained net buyers during the week, where Foreign Institutional Portfolio Investment (FIPI) witnessed an inflow of US$1.9mn vs UD$18.38mn outflow last week, whereas the average volume traded increased by 0.6% WoW and the average value of shares traded decreased by 21.7% WoW. The week started with investors being cautious in the roll-over week. Index started the week with a decline as oil & gas sector reacted negatively to the downward trend of oil price. However, OGDC’s above expected earnings helped it to sustain the pressure. The news of Drug Regulatory and Protection Authority (DRAP) agreeing to a further increase in prices triggered the pharmaceutical sector. Similarly, depreciation of Yen was welcomed by the auto sector. Cements had a mixed week on the back of foreign investors selling initially leading the stocks to fall in the red but then the anticipation of higher than expected sales data took the sector into the green. Speculation was again seen in K-Electric (KEL) as news of the acquisition gained substance after it was reported that two Chinese companies have submitted bids to acquire 66% stake in the company. Government borrowing of PRs215bn in the auction of PIBs was seen as a positive On the macro front, foreign reserves crossed US$23bn mark on account of inflow from international financial institutions. Country’s current account deficit stood at US$591mn, up 152% MoM. Remittances fell by 20% while the service exports declined by a huge 468%. Combined deficit of goods, services and income stood at US$2.19bn in the first month of FY17 compared to US$2.0bn in same period of FY16. Even after the GSP+ status and zero-rated regime, exports continued their downtrend, going down by 4% YoY. Services trade for the month of Jul-16 clocked in with a deficit of US$290mn, up 67% MoM. Outlook As the momentum of result announcement is set to significantly slow down next week, the index is likely to enter into a relative dull period whereby sector related newsflow and politics may dominate the sentiments. Monthly cement and urea numbers are likely to make big impression as the month draws to a close. Similarly, ongoing political noise in the context of opposition protest on Panama Leaks and sudden changes in political scene in Karachi may also receive more importance in absence of other significant newsflow. Overall we expect index to continue to trade in a close range and expect investors to remain cautious and carry the theme of selective buying. LUCK, DGKC, AICL and HASCOL are some of the prominent ones expected to release their result next week. Our top picks include ICI, NPL, LUCK, DGKC, ENGRO, UBL, POL, OGDC, MUGHAL and INDU. This report has been prepared by KASB Securities Ltd. and is provided for information purposes only. Under no circumstances is to be used or considered as an offer to sell or solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained therein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time KASB Securities Ltd. and any of its officers or directors may, to the extent permitted by law, have a position, or otherwise be interested in any transaction, in any securities directly or indirectly subject of this report. This report is provided solely for the information of professional advisers who are expected to make their own investment decisions without undue reliance on this report and the company accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents. In particular, the report takes no accounts of the investment objectives, financial situation and particular need of individuals, who should seek further advice before making any investment. This report may not be reproduced, distributed or published by any recipient for any purpose. The views expressed in this document are those of the KASB Securities & Economic Research Department and do not necessarily reflect those of KASB or its directors. KASB, as a full-service firm, has or may have business relationships, including investment-banking relationships, with the companies in this report. Page 2
3. Pakistan Weekly – Aug 26, 2016 News This Week Economic Indicators & Data points Current account deficit surges 152% in July (BR): As per the latest data released by State Bank of Pakistan, country’s current account deficit clocked in in at US$591mn, up 152% MoM. The large deficit was mainly because of decrease in remittances and service exports. July services account posts US$290mn deficit (BR): Services trade for the month of Jul-16 clocked in with a deficit of US$290mn, up 67% MoM. The decline was majorly as a result of the decline in services exports which were down by 114% on MoM basis. Reserved clocked in at US$23.1bn (Dawn): An inflow of US$467mn from the international financial institutions caused the reserves to cross US$23bn level, for the week ended 19-Aug-16. Market, Policy and Politics FTA talks with Indonesia: Pakistan sets condition (BR): Reportedly, Pakistan has refused to start negotiations on Free Trade Agreement (FTA) with Indonesia until Pakistan's concerns on existing Preferential Trade Agreement (PTA) are addressed within 6-mths. Sector and Corporate highlights Textile exports down 4% in Jul-16 (Dawn): As per the latest data released by Pakistan Bureau of Statistics, textile exports for Jul-16 clocked in at US$982.6mn, down 4% YoY. The slump in exports was witnessed even after the GSP+ status and zero-rated regime, which is effective from 1-Jul-16. Chinese company in run for control of K-Electric (The Nation): Reportedly, Chinese clean-energy group Golden Concord Holdings Ltd is competing with Shanghai Electric Power Company for buying 66% stake in K-Electric Ltd. Meezan bank to issue Sukuk of PRs7bn (The News): According a bourse filing, Meezan Bank will issue Sukuk bond of PRs7bn in a private placement and the proceeds will be used to increase operations of the bank. The bond will be a rated, unsecured and subordinated Tier-II eligible Sukuk. OGDC discovers oil (Dawn): Oil and Gas Development Company Ltd (OGDC), along with joint venture partners including PPL and GHPL, has completed development work on Nashpa Well No. 6 and 7 located in Khyber-Pakhtunkhwa (KPK). The wells are expected to add 5250bpd of crude oil and 23.7mmcfd of gas to the system by Sep-16 after the 7-km pipeline is being laid. Formula for the subsidy on Urea and Dap finalized (Dawn): Government has drafted a formula to provide subsidy on fertilizer to endconsumer whereby PRs50 will be borne by the manufacturer while the government will borne the amount of reduced GST from 17% to 5% and the remaining amount of subsidy. The burden of subsidy will be shared by federal and provincial government. Page 3
4. Pakistan Weekly – Aug 26, 2016 This Week’s Top Stories Monday, Aug 22, 2016 - FATIMA - Dual surprise in 2Q earnings; volumes set to rebound in 2H, Buy! • Fatima Fertilizer Ltd’s (Fatima) 2Q16 results managed to deliver two positive surprises where not only earnings came in above-expected (at PRs0.88/sh, vs expectation range of PRs0.5-0.7/sh), but also interim cash payout of PRs1.25 surprised the market. • We believe strong 2Q earnings should serve to act as a crucial catalyst to shake-off relative underperformance of the stock price (down 23% YTD vs -7% for sector and +19% for market). We revise our estimates by 4/-14/-12% for CY16/17/18E to reflect recent changes in pricing/subsidy mechanism. • We reiterate our Buy on Fatima with a revised DCF-based PO of PRs38.0/sh given: (1) worst of industry dynamics appears priced in, (2) D/Y is quite healthy at 7.4% for CY16E, (3) stock valuations are undemanding at CY17E P/E of 8.3x, and (4) de-leveraging is set to accelerate in CY16/17E. Mohammad Fawad Khan, CFA (Fawad.khan@kasbsec.com) Syeda Humaira Akhtar (Humaira.akhtar@kasbsec.com) Tuesday, Aug 23, 2016 - HBL - Positives dominate in 2Q; concerns on asset placement remains; Neutral • Habib Bank Ltd’s (HBL) 2Q earnings of PRs4.73/sh came broadly in-line with street estimates while cash payout too fail to carry any surprise. Positives have dominated 2Q/1H results, stemming from robust Net Interest Margins (NIMs), pick-up in loan growth, favorable pick-up in PIB stocks and contribution from non-fund income. • Consequently, we have nominally revised up our estimates by 2/3/2% for CY16/17/18E, incorporating 2Q16 results and conference call takeaways and lift our PO (based on justified P/BV) to PRs209. • We maintain Neutral rating on the bank given recent price run-up, which have made valuation (P/BV of 1.56x in CY16E) not so attractive given expected deceleration of ROE from 20% in CY15 to 17.5% in CY16E. Mohammad Fawad Khan, CFA (Fawad.khan@kasbsec.com) Wednesday, Aug 24, 2016 – MCB - Positioned for low risk & downtrend in ROE; reiterate Neutral • MCB Bank Ltd’s (MCB) 2Q/1H16 results and conference call highlight continuity of bank’s strategy of low-risk assets and liability positioning and substantiate our thesis of flattish earnings and slowing NIMs & ROE over 2016/17E. • We have tweak down our estimates by -6/-10/-2% for CY16/17/18E to incorporate Super Tax, and lower income on delayed tax refund. Meanwhile, key trigger in near-term includes the result of ongoing due diligence by MCB for acquisition of NIB Bank (likely within a month). • Trading at CY16E P/BV of 1.6x and D/Y of 7.5%, we retain our Neutral rating on the bank with revised PO of PRs216 (based on Justified P/BV). Mohammad Fawad Khan, CFA (Fawad.khan@kasbsec.com) Thursday, Aug 25, 2016 – OGDC - Closing a challenging year on a strong note; reiterate Buy • Oil and Gas Development Company (OGDC) has closed a challenging year on a strong note with double surprise on earnings and cash payout. FY16 EPS of PRs13.94 came in 4% higher than street estimates while cash payout also fell above the expected range. • Updates on OGDC’s conference call are largely positive with the company setting conservative drilling/production targets, in our view. Accordingly, we have lifted our estimates by 1/3/7% for FY17/18/19E primarily due to better production outlook. We also upgrade our DCFbased PO to PRs164 (15% upside). • With strong results in the bag and near-term production/exploration triggers ahead, we believe OGDC’s stock has the potential to shade-off relative underperformance. OGDC trades at EV/EBITDAX (excluding exploration) of 4.0x (FY17E, 12% discount to peers) and implied oil prices of US$28/bbl (broadly in-line). Buy! Mohammad Fawad Khan, CFA (Fawad.khan@kasbsec.com) Friday, Aug 26, 2016 – CHCC - All eyes on upcoming expansion; maintain Neutral on stretched vals • While Cherat Cement Company Limited’s (CHCC) FY16 earnings of PRs7.96/sh failed to deliver any major surprise, the final cash payout of PRs2.25/sh, came slightly above expectation. • CHCC’s before-tax earnings grew by an impressive 23% YoY; however, a higher effective tax rate of 32% dragged the bottom line to post a modest growth of 9% YoY (PAT: PRs1.4bn). • Although, the commencement of operations of the new 1.3mn ton cement line (expected in Nov/Dec-16) along with a 6MW Waste Heat Recovery (WHR) and the subsequent cost savings remain key triggers in the near-term; nevertheless, we maintain our Neutral stance on the scrip with a DCF-based PO of PRs131, as we believe the positives emanating from expansion project are already priced-in. Syeda Humaira Akhtar (Humaira.akhtar@kasbsec.com) Page 4
5. Pakistan Weekly – Aug 26, 2016 Stock Market – Last week in pictorals Chart 1: KSE-100 Index Chart 2: KSE Advance/ Decline Ratio 40,000 3.0 39,900 2.5 39,800 39,700 2.0 39,600 1.5 39,500 39,400 1.0 39,300 0.5 39,200 39,100 0.0 22-Aug 23-Aug 24-Aug 25-Aug 26-Aug 22-Aug 23-Aug 24-Aug Source: KSE Source: KSE Chart 3: Pak Foreign Portfolio Flows (US$mn; US$=PRs100) Chart 4: KSE- Volumes & Values 20.0 Shrs mn 400 16.5 15.0 10.5 9.5 5.0 1.9 8.7 7.4 10.0 5.1 1.3 0.0 (2.9) -5.0 (3.4) -10.0 (8.5) (8.3) (10.4) -15.0 22-Aug 23-Aug Inflow 24-Aug Outflow (11.4) (12.1) 25-Aug 350 14,000 300 12,000 250 10,000 200 8,000 150 6,000 100 4,000 50 2,000 0 26-Aug 0 22-Aug Net 23-Aug 24-Aug Volume Source: KSE Chart 5: Price to Money Ratio Chart 6: Off market activity 120.0% 25-Aug 26-Aug Value shrs ('000) 14,000 PkRmn 400 100.0% 80.0% 350 12,000 300 10,000 250 60.0% 26-Aug PRsmn 16,000 Source: NCCPL 8,000 200 6,000 150 40.0% 20.0% 100 4,000 50 2,000 J u n -0 7 Oc t-0 7 M ar-0 8 Au g-0 8 J an -0 9 J u n -0 9 N o v-0 9 Ap r-1 0 Se p -1 0 Fe b -1 1 J u l-1 1 D e c-1 1 M ay-1 2 Oc t-1 2 M ar-1 3 J u l-1 3 D e c-1 3 M ay-1 4 Oc t-1 4 M ar-1 5 Au g-1 5 J an -1 6 J u n -1 6 0.0% Source: KSE 25-Aug 22-Aug 23-Aug 24-Aug Value Traded (PkRmn) 25-Aug 26-Aug Turnover ('000) Source: KSE Page 5
6. Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 -30 .0 Source: SBP 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - Import -Value Export - Value Source: SBP Source: SBP Chart 11: 6-mth T-Bill Yield (%) Chart 12: Yield Curve (%) 12.0% 11.0% 10.0% 9.0% 10.0% 8.0% 9.0% 7.0% 6.0% 3m 6m Jan- 16 1 yr 3 yr Jul- 15 5 yr Source: SBP Source: SBP Chart 9: Import & Export (US$mn) Chart 10: Foreign Exchange Rate (PRs/US$) Aug-16 Apr-16 Dec-15 Aug-15 Apr-15 Dec-14 Aug-14 Apr-14 Dec-13 Aug-13 Apr-13 Dec-12 20.0 Apr-12 70.0 Aug-12 170.0 Dec-11 270.0 Apr-11 320.0 Aug-11 370.0 Dec-10 420.0 Aug-10 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Chart 7: Revenue Collection (PRsbn) Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Pakistan Weekly – Aug 26, 2016 Economy Watch Chart 8: Forex Reserves (US$mn) 25,000 20,000 220.0 15,000 120.0 10,000 5,000 - 111.0 107.0 103.0 99.0 95.0 91.0 87.0 83.0 79.0 75.0 71.0 67.0 63.0 59.0 55.0 14.0% 13.0% 12.0% 11.0% 8.0% 7.0% 6.0% 10yr 15 yr 20 yr 30 yr Jan- 15 Source: SBP Page 6
7. Pakistan Weekly – Aug 26, 2016 Stock Market Synopsis Last week 75.8 230.7 123.6 5.0 39,499.1 26,493.1 Mkt. Cap (US$bn) Avg. Dly T/O (mn. shares) Avg. Dly T/O (US$ mn.) No. of Trading Sessions KSE 100 Index KSE ALL Share Index Chart 13: KSE-100 Active Issues (ADTO-million shares) This week 76.5 232.0 96.8 5.0 39,926.7 26,792.7 % Change 1.0% 0.6% -21.7% 1.1% 1.1% 1M 74.7 229.7 107.2 24.0 39,147.3 26,119.1 3M 71.1 200.4 105.5 62.0 36,541.0 24,824.5 12M 69.7 183.8 87.6 251.0 33,537.4 23,448.4 Chart 14: KSE-100 Least Traded Issues (ADTO- shares) K-Electric Limited (KESC) Bata (Pakistan) Sui Northern Gas Ltd Rafhan Maize Pakistan Tobacco Company TRG Pakistan Pak Services Sui Southern Gas Nestle Pakistan Limited Bank Of Punjab - - 5.0 10.0 15.0 20.0 20 40 60 80 100 120 140 25.0 Source: KSE Source: KSE Chart 15: KSE-100 Leaders (% change) Chart 16: KSE-100 Laggards (% change) Murree Brewery Habib Metro Bank International Steel Limited Ibrahim Fibers Service (Shoes) Industries Shell Pakistan Allied Rental Modaraba Shifa Int Hospitals Ltd IGI Insurance Sui Northern Gas Ltd 0% Source: KSE 5% 10% 15% 20% 25% 30% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% Source: KSE Page 7
8. Pakistan Weekly – Aug 26, 2016 Macro Economic Indicators Real GDP growth % (base year:FY06) Agriculture growth % Industrial growth % Services growth % FY12 3.8 3.6 2.5 4.4 FY13 3.7 2.7 0.6 5.1 FY14 4.0 2.7 4.5 4.4 FY15P 4.2 2.9 3.6 5.0 FY16E 4.7 -0.2 6.8 5.7 Exports USD billion Imports USD billion Trade account balance USD billion Remittances USD billion Current account balance USD billion 23.6 44.9 -21.3 13.2 -4.7 24.5 45.0 -20.4 13.9 -2.3 25.1 45.1 -20.0 15.8 -2.9 23.9 46.0 -22.1 18.5 -2.3 22.0 44.1 -22.2 19.2 -1.7 11.0 14.1 94.6 12.3 7.5 15.9 99.6 9.9 8.6 12.5 99.0 10.0 4.5 13.2 101.8 7.0 3.2 13.0 106.0 6.0 180.7 1,321 675 184.4 1,334 721 188 1,384 878 191.7 1,512 1013 195.5 1111 15,285 2,053 813 11,020 2,314 1,447 14,700 2,514 1,700 18,706 2,910 709 21,860 3,418 1,000 Govt External Debt (USD billion) Govt Domestic Debt (PRs trillion) 57.4 7.6 53.1 9.5 56.9 10.9 56.1 12.2 61.3 13.2 Govt External Debt as % of GDP Govt Domestic debt as % of GDP Total public debt as % of GDP 25.5% 36.1% 61.6% 22.6% 42.5% 65.1% 21.6% 43.5% 65.1% 19.5% 44.5% 64.1% 19.7% 44.2% 63.9% 6.60% 15.10% 13.00% 8.00% 15.00% 13.90% 5.50% 15.00% 13.70% 5.30% 15.10% 14.50% 4.30% - CPI (base year:FY08) Money Supply (M2) growth % Exchange rate PRs/USD 6m T-bill WAY% Population (million) Per Capita income (USD) Development Exp (PSDP) (PRs billion) Total Foreign Exchange reserves (USD mn) Tax Revenues in (PRs billion) Foreign Direct Investment (USD million) Budget deficit as % of GDP Investment as % of GDP Saving as a % of GDP Source: SBP, PBS and KASB estimates KASB Securities and Economics Research Mohammad Fawad Khan Pakistan Macro, Strategy & Banks +92 21 111 222 000 ext 330 Fawad.khan@kasbsec.com Syeda Humaira Akhtar Cements & Fertilizer +92 21 111 222 000 ext 332 Humaira.akhtar@kasbsec.com Shahrukh Saleem Textile, autos +92 21 111 222 000 ext 337 Shahrukh.saleem@kasbsec.com Kamal Ahmed Technical +92 21 111 222 000 ext 383 Kamal.Ahmed@kasbsec.com M. Noman Mughal Assistant Manager (Database) +92 21 111 222 000 ext 339 Noman.mughal@kasbsec.com Shabana Iqbal Research Support +92 21 111 222 000 ext 339 Shabana.Iqbal@kasbsec.com Page 8