AKD Quotidian about — Pakistan Market: Feb’13 Review and Outlook

Karachi, March 01, 2013 (PPI-OT): The KSE-100 Index gained 5.4% in Feb’13 to close at 18,174 points, bringing CYI3TD gains to 7.5%.

According to AKD Securities average traded volumes and value rose by 80%MoM to ZO7m shares and US$9Omn on positive corporate developments and continued FPI flows (net: US$29m). In this regard, while AKD Universe growth of 11%YoY in 40CY12 tapers to just 1%YoY ex-PTC, a spate of positive corporate developments including long-term gas supply plan for SNOP-based fertilizer manufacturers and continued higher LDI earnings for telecoms should ensure corporate profitability remains strong.

That said, with results season largely over, investor attention over the next few months is likely to be dominated by politics and macroeconomic developments. Regarding the latter, although the PkR has held up so far in CYI3, it could potentially weaken swiftly if the import cover continues to fall. This could possibly impact FPI flows and cause the market to take a breather.

Feb’13 Review: The KSE-100 Index gained 5.4% in Feb13 to close at 18174 points, bringing CY13TD gains to 7.5%. Average traded volumes and value rose by 80%MoM to 3O7rnn shares and US$9Omn. This was backed by positive corporate developments in tandem with US$29mn in net FPI as PkR/US$ parity slipped by a contained O.5%MoM on SBP intervention and stricter regulations against currency speculation. Within main board sectors, Fixed Line Telecom was a stellar gainer (+27% in the month) as higher LDI earnings were revealed in incoming results.

AKD Securities tops pick in this segment is PTC (TP: PkR37/Buy). Other gainers during the last month were ENGRO (TP: PkR2O7/Buy) with resolution to gas supply concerns in sight as well as the Nishat Group textile companies (NML and NCL) on continued strong exports, particularly to China. On the flipside, Banks (ex-MCB) underperformed on lower 4QCY1 2 earnings amidst tighter interest margins.

Corporate results: Combined NPAT for the AKD Universe came in at PkRY3.Sbn in 4QCY12, up 11%YoY/25%QoQ. Adjusted for PTC (higher LDI earnings in 40CY12 vs. VSS expense in 30CY12), normalized earnings were flattish on both a YoY and QoQ basis. Ex-Banks and PTC growth tagged in at 8%YoY/7%QoQ. Results were broadly in line with expectations (-3% deviation) although +ve surprises were delivered by LOTPTA, EFOODS and PTC while FATIMA, MCB and OGDC posted below-line results. (See detailed table on next page).

Outlook: With results season largely over, news flow gripping investor attention over the next few months will likely be 1) forex reserves position (less than 4m import cover), 2) political noise considering elections are around the corner and 3) sector/stock specific developments. In this regard, although market valuations (forward PIE: 7.9x, IDlY: 6.9%) remain attractive (-40% discount to the region on PIE basis), relative lack of positive catalysts could potentially cause the market to take a breather, particularly if the currency starts to weaken. In this regard, the import cover could potentially fall below 3m in the next few months where historically the PkR loses 10% vs. the US$ each time import cover below 3m.

Corporate earnings actual vs. estimates:

MP%T(P9Rmn)4MAY12 A4MYYI2EDen.4QCYIIAToY3%TYI2AMoM
EN%M0

1776

1670

6%

2470

-28%

(102)

n.m.

FATIMA

2,101

3084

-32%

2255

-7%

1,417

48%

FF82

2,206

2,049

8%

3597

-39%

1,487

49%

FF0

7047

6855

2%

8,657

-19%

2,422

104%

EOTL

(24)

22

nm,

(289)

-88%

24

-239%

LOTATY

239

135

77%

(409)

n.m.

(128)

n.m.

080

2,325

2,520

-8%

2462

-6%

2,905

-20%

862

0,131

0,027

1%

2,720

-24%

2,404

-7%

MOB

2,928

2,020

-50%

7,206

2%

2,440

-22%

092

4,222

2,924

7%

2,200

-22%

2,262

02%

982

4,241

2,920

11%

4,290

1%

2,024

-22%

FF0092

977

711

27%

427

102%

201

22%

1800

282

222

%2%

822

-22%

221

-29%

9060

1012

1,271

-12%

218

54%

1,418

0%

LOOT

7,272

2,172

2%

1212

20%

2,014

12%

0090

2,227

2,248

12%

1,727

20%

2,114

54%

40200

1,922

1,202

7%

1,209

22%

1,724

10%

FTC

9446

7067

34%

1442

555%

(8260)

n.m.

OGDC

23,571

27174

-13%

19658

20%

25,656

-8%

FOL

3098

3,153

-2%

2714

14%

2566

21%

PPL

11019

11,851

-7%

10227

8%

11,298

-2%

P50

2084

1503

16%

2096

-1%

4190

-50%

NPL

828

618

34%

418

98%

509

63%

APL

864

1,078

-20%

1120

-23%

1,291

-33%

Total

93775

96,283

-3%

84546

li%

74,754

25%

Ex-PTC

84329

89,2W

-5%

83,105

1%

83014

2%

Ex-PTC and Banks

64307

68,705

-6%

59,521

8%

60,253

7%

Source: AKD Research

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