AKD Securities Limited – Off the Analyst’s Desk (12-09-2019)

Karachi, September 12, 2019 (PPI-OT): HUBC: High finance cost dragged 4Q/FY19 earnings

Hub Power Company Ltd (HUBC) closed the financial year on a weak note, with 4/15% YoY/QoQ lower 4QFY19F consolidated NPAT of PKR2.67bn (EPS: PKR2.22). This took FY19 earnings to PKR11.24bn (EPS: PKR9.37), flattish on a YoY basis. The decline in 4QFY19F earnings was majorly attributable to 108% YoY increase in finance cost due to CAPEX financing and higher interest rates. HUBC opted for additional short term borrowing during 4QFY19 to increase its stake in 1,320MW CPHGCL project (exercise date for call option was anytime 180 days before CoD i.e. May’19), as funds raised through the recent right issue were expected to materialize mid-July.

For full year FY19, 67% YoY higher finance cost was partially offset by PKR devaluation impact, keeping the bottomline flattish YoY. As per expectations, HUBC did not announce any cash dividend along with its 4Q result, courtesy liquidity constraints. To note, the proceeds from the first Energy Sukuk were entirely used to retire payables to PSO. Our TP of PKR101/sh implies an upside of 38.5% on last close- Buy.

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