Break down in supply chain, fuel shortages and nationwide loading shedding
are becoming major sources of concern as PSO receivables reach a daunting
Rs155bn of which, around Rs131bn is the circular debt.
It appears that this famous bubble of circular debt is on the verge of bursting. It
has reached its limit and is creating enormous amount of problems for Pakistan
State Oil as well as for other refineries. It has hurt PSO’s liquidity massively
causing it to default on local refineries payments in this month, as a result of
Rs131bn to PSO by the power sector. In fact the companies have continuously
defaulted on its payment obligations hence hampering PSO’s ability to meet its
creditors’ payments.
This delay in payments to refineries has, in turn, affected local production
which is a sign that if not taken drastic measures immediately, our country
would suffer severe shortage of fuel causing prices of petroleum products to
reach sky high.
Moreover, the deteriorating liquidity of PSO is making it difficult for it to meet
its international obligations, for which the company is struggling very
assiduously as any default on this end would disturb supplies which would then
take months to resume, thus creating a gap in imports as well.
Hence, it is a dire need for the company to receive its payments as any further
delays in the near future would cause fuel cargoes to be deferred, as PSO has
utilized all its resources for financing future product supplies. As far as the local
production of fuel oil is concerned, it is already in melancholy and imports are
needed to curb the supply shortages to avoid increased load shedding.
In a nutshell, PSO needs to receive its rightful share of cash in the nearest
future to avoid further hindrances in local production and import of fuel oil, to
evade the severe scarcity of the concerned product, rising prices and intense
load shedding; before it gets bankrupt.
We have a ‘Sell’ stance on PSO with FY12 expected EPS in the range of
Rs57/sh‐Rs60/sh.
Tuesday, September 27, 2011
KSE TRENDS
Adm. Mullen's outburst against Pakistan's key intelligence agency ISI has some
reverberations on Pakistani politics as well as decision making of our fund manager
friends.
It’s being said that America would continue to show restraint despite threatening
posture, since any 'unilateral attack' on sanctuaries in North Waziristan may ignite
further trouble for the weak Pakistani political government. The trouble would
emanate within the streets which could wilt present 'democratic set up' wherein all
strong army could push for an interim set up. The shaping up of this scenario is now
evident from recent overtures by army top brass in Pakistan's troubled Sindh province
whereby army chief exchanged notes with Karachi based businessmen that indicate
increased interest to trigger 'political change'. Till now army has shown restraint
despite economic meltdown given political expediency.
In light of this we pronounce that funds should keep FFBL since it would continue to
dominate investors interest since it still provide 30% upside from present price. Many
analysts have failed to capture real value in FFBL (given lack of understanding on agridynamics
+ co relation with international price) and this is evident from funds holding
position on the stock.
Secondly, other fertilizer players are also at an advantageous position such as FFC
and Fatima (we see FFC and Fatima touching new highs). We do not like holding
company i.e. Engro Corp and instead would like investors to wait for Engro Fertilizer
IPO.
Among oil explorers, it is Pakistan Oilfields which continues to remain 'favorite'
despite delays coming in Domial2 (presence of 1mmcfd gas + company's inability of not
lifting thick oil) that would keep investors at tenterhooks. Though, we like OGDC due
to developments in Zin Block where 85 development wells are planned.
Among emerging players, investors should not forget new German plant of Fauji
Cement (FCCL; target price Rs 8/sh) which is now under production. People would
only realize value once it would make a Lotpta like journey in coming months. Among
other emerging players, Engro Foods (EFoods) also provide value.
Among banks, MCB and BAFL provide value (we like BAFL since it provides lot of
liquidity). Despite liquidity constraints, ABL is also a good option.
The developing political situation, though would initially send shivers down the spine,
is likely to give 'sign of relief' to investors in and around December 11'. At present
investors are wary from the current political impasse and are hesitating on filing CGT
returns.
reverberations on Pakistani politics as well as decision making of our fund manager
friends.
It’s being said that America would continue to show restraint despite threatening
posture, since any 'unilateral attack' on sanctuaries in North Waziristan may ignite
further trouble for the weak Pakistani political government. The trouble would
emanate within the streets which could wilt present 'democratic set up' wherein all
strong army could push for an interim set up. The shaping up of this scenario is now
evident from recent overtures by army top brass in Pakistan's troubled Sindh province
whereby army chief exchanged notes with Karachi based businessmen that indicate
increased interest to trigger 'political change'. Till now army has shown restraint
despite economic meltdown given political expediency.
In light of this we pronounce that funds should keep FFBL since it would continue to
dominate investors interest since it still provide 30% upside from present price. Many
analysts have failed to capture real value in FFBL (given lack of understanding on agridynamics
+ co relation with international price) and this is evident from funds holding
position on the stock.
Secondly, other fertilizer players are also at an advantageous position such as FFC
and Fatima (we see FFC and Fatima touching new highs). We do not like holding
company i.e. Engro Corp and instead would like investors to wait for Engro Fertilizer
IPO.
Among oil explorers, it is Pakistan Oilfields which continues to remain 'favorite'
despite delays coming in Domial2 (presence of 1mmcfd gas + company's inability of not
lifting thick oil) that would keep investors at tenterhooks. Though, we like OGDC due
to developments in Zin Block where 85 development wells are planned.
Among emerging players, investors should not forget new German plant of Fauji
Cement (FCCL; target price Rs 8/sh) which is now under production. People would
only realize value once it would make a Lotpta like journey in coming months. Among
other emerging players, Engro Foods (EFoods) also provide value.
Among banks, MCB and BAFL provide value (we like BAFL since it provides lot of
liquidity). Despite liquidity constraints, ABL is also a good option.
The developing political situation, though would initially send shivers down the spine,
is likely to give 'sign of relief' to investors in and around December 11'. At present
investors are wary from the current political impasse and are hesitating on filing CGT
returns.
Monday, September 26, 2011
GOLD TRENDS third support level of US$1650 an ounce by touching US$1628 an ounce on September 23, 2011. It opened today at US$1650 an ounce an
Gold has broken its third support level of US$1650 an ounce by touching US$1628 an ounce
on September 23, 2011. It opened today at US$1650 an ounce and is hovering at US$1597 an
ounce. This decline has been brought about by the rise in dollar against a basket of
currencies, the efforts by European leaders to come up with new ways to resolve the debt
issue and the decision by the Fed to replace short term debt to long term bonds. Moreover,
the fear of global recession has caused investors to sell their metal holdings and realize
whatever gains they can and as fast as they can.
We expect the metal to touch US$1475 an ounce in the short term and go further beyond
this level if investors continue to invest in dollar and divest from gold.
However, this decline is expected to reverse by the end of December 2011 as we should not
forget that the US debt is still lingering, the Euro zone debt crisis is still unresolved,
unemployment is not declining and growth is decelerating in the large world economies.
Moreover, a quantitative leasing‐3 is expected in 2012 which would support gold causing it to
once again become an investment haven.
It is also very likely that investors start buying the precious metal at these low prices,
resulting in an increase in demand for bullion and subsequently raising prices.
on September 23, 2011. It opened today at US$1650 an ounce and is hovering at US$1597 an
ounce. This decline has been brought about by the rise in dollar against a basket of
currencies, the efforts by European leaders to come up with new ways to resolve the debt
issue and the decision by the Fed to replace short term debt to long term bonds. Moreover,
the fear of global recession has caused investors to sell their metal holdings and realize
whatever gains they can and as fast as they can.
We expect the metal to touch US$1475 an ounce in the short term and go further beyond
this level if investors continue to invest in dollar and divest from gold.
However, this decline is expected to reverse by the end of December 2011 as we should not
forget that the US debt is still lingering, the Euro zone debt crisis is still unresolved,
unemployment is not declining and growth is decelerating in the large world economies.
Moreover, a quantitative leasing‐3 is expected in 2012 which would support gold causing it to
once again become an investment haven.
It is also very likely that investors start buying the precious metal at these low prices,
resulting in an increase in demand for bullion and subsequently raising prices.
KSE MARKET TRENDS 26-9-2011 The possibility of fallouts of straining relationship between two allies weighed heavily over the market. Panic selling
KSE MARKET TRENDS 26-9-2011
The possibility of fallouts of straining relationship between two allies weighed heavily over the market. Panic selling was witnessed by the local investors whereas positive net flow of $1 million was witnessed from the foreign investors.
Political analyst believes that there is a likelihood of de-escalating in crisis between Pakistan and the US as the former started consultation with some of its close allies including China and Saudi Arabia . The PM of Pakistan also called an All Parties Conference on September 29th to discuss the situation.
The SBP has decided to intervene to halt the depletion in the Pakistani Rupee (PKR) against the US Dollar (USD). PKR traded over Rs. 90 in the open market yesterday.
Friday, September 16, 2011
PPL is seeking Joint venture with Iranian oil companies
PPL is seeking Joint venture with Iranian oil companies
According to KSE notices, PPL is seriously considering Joint venture operation in oil and gas exploration sector of Iran with Iranian oil companies (Joint venture will lead stake in different blocks of Pakistan and Iran). Company is evaluating different options in oil and exploration sector. However, company has not finalized any agreement with Iranian oil companies. If any contract finalized between PPL and Iranian oil companies it will have huge positive impact on PPL as Iran have huge oil and gas reserves.
We maintain our Buy stance on PPL with target price of PKR 259/share.
Thanks and Best Regards,
Research Department
Phone : 0092-21-35317703
Fax : 0092-21-5895328
M.M. Group of Companies
MM Tower, 3-C, Khayaban-e-Ittehad
Phase – II extension
D.H.A, Karachi
PPL is seeking Joint venture with Iranian oil companies
PPL is seeking Joint venture with Iranian oil companies
According to KSE notices, PPL is seriously considering Joint venture operation in oil and gas exploration sector of Iran with Iranian oil companies (Joint venture will lead stake in different blocks of Pakistan and Iran). Company is evaluating different options in oil and exploration sector. However, company has not finalized any agreement with Iranian oil companies. If any contract finalized between PPL and Iranian oil companies it will have huge positive impact on PPL as Iran have huge oil and gas reserves.
We maintain our Buy stance on PPL with target price of PKR 259/share.
Thanks and Best Regards,
Research Department
Phone : 0092-21-35317703
Fax : 0092-21-5895328
M.M. Group of Companies
MM Tower, 3-C, Khayaban-e-Ittehad
Phase – II extension
D.H.A, Karachi
Gold fell yesterday by 0.66% closing at US$1824 an ounce after touching US$1844 an ounce.
Gold fell yesterday by 0.66% closing at US$1824 an ounce after touching US$1844 an ounce. This
decline has been mainly caused by the news that French and German officials are convinced that the
debt issue would be resolved and that countries are being probed to incur efforts to do so.
French President Nicolas Sarkozy and German Chancellor Angela Merkel received international calls to
increase efforts in combating the European debt crisis.
According to recent news UBS AG (UBSN), Switzerland’s biggest bank, faced a trading loss of about
$2bn owing to unauthorised trading at its investment bank. However, European stocks were not
affected by this news and instead climbed as the assurance from Germany and France, that Greece will
remain a member of the euro, outweighed this huge trading loss.
Gold also declined as vice chairman of the China’s top economic planning agency stated that China is
willing to help the debt burdened European nation by buying Euro bonds from countries who are
involved in this debt nightmare.
If gold closes below the US$1793 support level it is feared to reach around US$1700‐ US$1740 an
ounce. However, if the plans to resolve the debt issue are not soon put into action, the bullion may rise
to a resistance level of around US$1880 an ounce.
In the short term we expect gold to hover at low prices as the US stock market is reviving, the Jobs
plan is under consideration and the European debt issue is under scrutiny.
decline has been mainly caused by the news that French and German officials are convinced that the
debt issue would be resolved and that countries are being probed to incur efforts to do so.
French President Nicolas Sarkozy and German Chancellor Angela Merkel received international calls to
increase efforts in combating the European debt crisis.
According to recent news UBS AG (UBSN), Switzerland’s biggest bank, faced a trading loss of about
$2bn owing to unauthorised trading at its investment bank. However, European stocks were not
affected by this news and instead climbed as the assurance from Germany and France, that Greece will
remain a member of the euro, outweighed this huge trading loss.
Gold also declined as vice chairman of the China’s top economic planning agency stated that China is
willing to help the debt burdened European nation by buying Euro bonds from countries who are
involved in this debt nightmare.
If gold closes below the US$1793 support level it is feared to reach around US$1700‐ US$1740 an
ounce. However, if the plans to resolve the debt issue are not soon put into action, the bullion may rise
to a resistance level of around US$1880 an ounce.
In the short term we expect gold to hover at low prices as the US stock market is reviving, the Jobs
plan is under consideration and the European debt issue is under scrutiny.
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