STOCK MARKET UPDATE: 06.03.2013

STOCKS

Karachi Stocks Up 107.11 Points:
KARACHI, Mar 05: The KSE-100 index was at 18160.43, up 107.11 points. (Today @ 10.44 am)

March 05, 2013

 5 TOP GAINERS  &  LOOSERS:

Indus Motor Co.	Rs 15.82	UniLever Pak	Rs (249.99)
Philip Morris Pak.	Rs 10.12	Indus Dying SD	Rs (23.00)
Attock Refinery	Rs 9.16	Colgate Palmolive	Rs (20.00)
National Refinery	Rs 9.08	Bhanero Tex.	Rs (15.25)
Sanofi Aventis	Rs 8.58	Pak Services	Rs (9.22)

Bearish spell continues on stock market

KARACHI, March 5: The KSE-100 index pulled back by 73.45 points on Tuesday, as investors, mainly the local institutions entered into profit-taking.
Traders, however, were scarcely surprised. They said it was expected as the results season had come to a conclusion with all major companies already announcing their earnings and payouts.
Although heavyweight OGDC and MCB Bank shed some of the values, it was to an extent compensated by some other pivotal. The Attock group stocks, Pakistan Oilfields and Attock Refinery managed to make substantial gains and put a floor under the fall so as to keep index above the 18,000 level.
Also the Mansha Group stocks, D.G. Khan Cement and Nishat Mills helped to prevent a bigger fall. At the lower side, intra-day, the index did break that support level to fall to 17,994.60 points, but finally managed to close at 18,053.32 points.
The market capitalisation based KSE-30 index shed 69.09 points to close at 14,721.45 points.
Foreign investors were net buyers of the value of $0.72m worth stocks. Among local participants, companies and banks also made net purchases of $1.12m and $1.35m.
However, mutual funds were net sellers of $3.91m worth shares.
Retail investors, punters and speculators played on both sides of the fence, seeking to make intra-day gains, which helped to buffer up the volume for the day to 225 million shares, up from 194 million shares traded on Monday.
Market participants said that the investors’ focus of attention was quickly shifting to the political landscape. They were waiting to see the interim set up, as the date of elections had already been announced. However, the deterioration in law and order situation mainly in Karachi was of considerable concern, analysts said.
Ahsan Mehanti at Arif Habib Corporation commented that the higher cement sales data for July-Feb 2012-13, recovery in global stocks and commodities supported the index to close above session’s low amid concerns for rising government debt, security unrest in the city and pending OGDC gas sales agreement with fertiliser companies.
Trading value jumped to Rs7.5 billion on Tuesday, from Rs4.8 billion the previous day. Market capitalisation stood down to Rs4.48 trillion, from Rs4.492tr.
In all 338 shares came up for trading on Tuesday with 185 stocks losing value against 129 gainers and 24 shares closing at their previous level.
The two biggest winners for the day were Indus Motor Company with its share price up by Rs11.79 to Rs328.24, followed by Philip Morris Pak higher by Rs10.12 to Rs212.54.
On the other hand, UniLever Pakistan declined by Rs249.99 to Rs10,500.01 and Indus Dyeing gave up Rs23 to Rs437.50.
In the top-10 traded scrips, PIA gained 95 paisa to Rs7.72 on the highest volume for the day at 27m shares. The second in terms of high turnover was Lotte PakPTA with 23m shares traded 30 paisa up to Rs7.99.
Jah Sidd Co hit the lower circuit with a loss of Re1 to Rs16.61 on 18m shares, PTC was down 25 paisa to Rs22.90 on 13m shares, Telecard lost 13 paisa to Rs6.70 on 12m shares, Nishat Mills made a major gain of Rs2.02 to Rs78.15 on 11m shares, Engro Corporation added 40 paisa to Rs123.53 on 11m shares, D.G. Khan Cement rose by Rs1.07 to Rs64.49 on 10m shares, Fauji Cement slipped by 10 paisa to Rs8.30 on 9m shares and Lafarge Pakistan was up by 4 paisa to Rs5.77 on 7m shares.

Capital markets day held

KARACHI, March 5: Elixir Securities and Credit Suisse jointly conducted a Pakistan ‘Capital markets day’ in New York, a press release said.
Aimed at providing global fund managers with deeper insight into some of Pakistan’s hi-growth sectors, the event attracted a wide range of investors with focus on emerging and frontier markets.
Pakistan stocks close lower, rupee steady: KARACHI: Pakistan's stock market closed 90 points lower on Tuesday, after investors sold stocks of market heavyweights.

The Karachi Stock Exchange's (KSE) benchmark 100-share index ended 0.54 percent, or 97.16 points, lower at 18,035.97 points.

Although there are more than 600 companies listed on the KSE, only about a tenth of them see regular trading, and around a dozen or so dominate the market.

The heavyweights include the Oil and Gas Development Company Ltd and Muslim Commercial Bank, both of which saw profit-taking from investors.

The Oil and Gas Development Company Ltd fell 1.31 percent to 203.50 rupees, while the Muslim Commercial Bank was down 3.57 percent to 217 rupees.

In the currency market, the rupee was steady at 98.13/98.18 against the dollar, compared to Monday's close of 98.13/98.18.

Overnight rates in the money market fell to 9 percent from Monday's close of 9.25 percent. (Reuters)

Company News:

Fertiliser profit plunges 41pc: KARACHI, March 5: The fertiliser sector profit-after-tax plunged 41 per cent to Rs22.2 billion in the year ended December 31, 2012, from a year ago PAT at Rs37.8 billion.
Sales edged higher by 7pc to Rs152.9 billion from Rs142.4 billion, yet the gross profit dipped by 19pc to Rs57.3 billion in the latest year from Rs71.2 billion the year earlier and gross margin shrank to 37pc from 50pc.
Net margins stood down to 15pc in 2012, from 27pc the previous year.
The fertilizer sector has delivered healthy all-weather growth.
The sector’s profitability over the five years has grown at an impressive CAGR of 33 per cent, with earnings growth led by robust operating margins, which peaked in 2011. However, the sector profitability reversed in 2012, due mainly to severe gas curtailment leading to low utilisation levels and margin compression due to higher gas prices and reversal in product prices.
“Although 2012, an awful year for the sector came to an end, clouds of uncertainty continues to loom over the sector,” says analyst at Arif Habib Securities.
Among many issues, with respect to the sector, gas remains on top.
Companies on Sui Northern Gas Pipelines (SNGPL) network suffered the most, with complete gas shut down for almost 290 days in 2012.
Total urea off-take for 2012 declined by 12 per cent to 5.2m tons, from 5.9m tons the earlier year. The low gross margin was mainly due to upsurge in feed stock and fuel stock prices.
Due to the commencement of Rabi season in the last quarter, along with expected increase in gas prices from Jan-13, urea off-take during 4QCY12 (Oct-Dec 12) surged by 55pc QoQ (in the expectation of increase in urea prices as was seen in Jun-12).
Analysts contend that with 180 million mouths to feed; food security stands out as of paramount importance to the country.
Fertilizer sector provides an important tool to raise crop productivity, which is why it receives subsidized feedstock (at Rs313 per mmbtu) — a third of other sectors— so as to lower prices of domestic urea compared with the product in international markets.
The government has placed complete ban on exports.
Going forward, analysts at Arif Habib Securities observed that the long-term gas plan was on the cards for the plants operating on the SNGPL network, which was a ray of hope for the fertiliser sector, in general, and Engro Corporation, in particular. However, some ambiguities remained, such as final sale price of gas, which included tolling charge, gas sale price and the capital expenditure of laying pipe-line from Kunnar Pasaki Deep to Qadirpur, which would eventually add up to the SNGPL network.
The overall situation would be clear once the Gas Sales Agreement (GSA) would be signed between Engro and the oil and gas giant, OGDC.
In their annual report 2012, the AKD Securities wrote in respect of ‘investment theme’ in fertilizer sector that the heavy import of subsidized urea had eroded manufactures’ pricing power in 2012.
The brokerage thought that the pricing power should return in 2013 if urea imports were curtailed post general elections.
SSGC, SNGPL to be unbundled: ISLAMABAD, March 5: With huge gas losses and increasing gas shortages, the government is embarking on a major reform programme envisaging unbundling of the two gas utilities SNGPL and SSGC into one countrywide transmission company and a number of regional distribution companies and introduce a new tariff regime for gas consumers.
The new tariff regime and unbundling process comes before the Economic Coordination Committee (ECC) of the cabinet for approval on Wednesday just 10 days ahead of the completion of the five-year constitutional tenure of the current government.
A meeting of the federal cabinet scheduled for Wednesday has been delayed for a day and the ECC’s meeting advanced by a day to ensure that all the ECC decisions were ratified by incumbent federal cabinet. It is based on a report of a committee comprising senior officials of the Planning Commission and ministries of petroleum and natural resources, water and power, finance and Oil and Gas Regulatory Authority which concluded “breaking up of one of the largest gas networks in the world into one transmission and multiple distribution companies for enhancing business efficiencies”.
All the business units will further need to be segregated in independent profit and cost centres for ensuring cost effective operation of the companies, it added.
The summary for the ECC argued that the unbundling of the gas sector and establishment of a gas market had assumed immense and immediate importance as the liquefied natural gas (LNG) and the pipeline imports could not be managed in the current regulatory environment.
The committee has proposed appointment of an independent consultant for unbundling of the natural gas transmission and distribution companies.
The consultant will also devise a new pricing mechanism for sale of natural gas to various sectors keeping in view the cost of imported gas while prescribing mechanism for determination of separate transmission and distribution tariffs keeping in view international standards for efficiency of the new entities including benchmarks for unaccounted for gas.
The petroleum ministry argued that existing pricing mechanism under which the Ogra had been disallowing higher system losses, theft and un-billed gas in law and order affected areas far exceeded the total return of the two companies, leading the gas sector to the ‘brink of bankruptcy’.
For an interim period, the gas pricing mechanism would be designed in a manner that the sale of gas to bulk and retail consumer ratio would be frozen at 2004-05 level when bulk gas sales stood at about 45 per cent and retail at 54 per cent for Sui Northern Gas Company Limited and SSGC’s bulk sales were at 54 per cent and retail at 45 per cent.
Since then, the bulk sales by the two companies had dropped to about 26 per cent owing to expansion of transmission network on ‘socio-political considerations’, resulting in higher leakages in retail system.
The summary also proposed to fix the cost of gas for gas losses at the level of 2004-05 on the premise that such losses were outside the control of the gas companies even though gas rates for consumers increased by almost 70 per cent since then.
The restructuring of pricing mechanism was expected to generate a profit of Rs2.9 billion to SNGPL and Rs3.6 billion to SSGCL in the interim period. At present two gas utilities SNGPL and SSGCL have integrated midstream and downstream operations serving more than 6.2 million consumers through a 130,000 kilometers of transmission and distribution network.
SNGPL operates in Khyber Pakhtunkhwa, Punjab and AJK while SSGCL has operations in Sindh and Balochistan. The federal government has majority shareholding in the two companies which are listed on three stock exchanges.
Under Ogra ordinance, the government had entrusted the Ogra to remove difficulties in the transitional period and to determine revenue requirements of both gas companies. Under this mechanism, prescribed price retained by the gas utilities is an aggregate of wellhead gas prices, transmission and distribution costs and profit margins currently at 17 and 17.5 per cent to SSGCL and SNGPL respectively as return on assets before financial charges and taxes.
To achieve ultimate objective of privatising the gas transmission and distribution system, the single transmission company would envisage gas transmission on an open-access basis from which a number of smaller distribution companies on regional basis would operate on a competitive manner to provide improved business discipline and customer management.
Similarly, a competitive gas market would be created with de-regulated prices and open access to the unbundled gas distribution companies for third-party gas suppliers.
The rate of return for private companies would be set at Karachi Interbank Offered Rate (Kibor) plus 9 per cent on the net operating fixed assets of the gas companies.
For the objective of determination of assets, the revaluation would not be carried out and instead written down value will continue to be followed for the purpose of computation of rate of return on assets because it was estimated that revaluation could increase the asset value by Rs14 billion that could result in significant increase in gas prices.

 MOHAMMED SALEEM MANSOORI