Karachi, May 31, 2012 (PPI-OT): As per the Karachi Stock Exchange notice, Hub Power Company (Hubcap) has decided to pay off the tax liability of PkRs 1.65 bn which was due in lieu of withholding tax.
According to Alfalah Securities Limited, the tax authorities had assessed the tax liability of PkRs 1.9 bn of which company had already deposited PkRs 297mn. This issue was pending case since 1999, due to which the assessed liability had grown to PkRs 3.25bn added by late payment penalty and interest charges. As per the SRO, exemption in respect of default surcharge and penalty for non-payment would be granted on the due amount if the defaulter pays actual tax dues by May 31, 2012. Moreover, in case refund becomes payable as a result of judgment of court after the issuance of the notification, the tax deposited by that tax payer would be refunded.
Earlier Federal Board of Revenue (FBR) had frozen the accounts of Hubcap along with dispatch of PkRs 3.0 per share interim dividends after the decision was announced by the Islamabad High Court in favour of FBR for the recovery of the said amount. Consequently, Hubcap filed an appeal in the Supreme Court along with a stay application to avoid the restriction imposed by the FBR while also delayed the payment of dividends.
Alfalah Securities Limited believes, the onetime payment of PkRs 1.6 bn would affect the cash flows of the company, which would in turn affect the dividend payout in that particular quarter only when the payment is made. Therefore, since the uncertainty is resolved, Hubcap can be considered to hold in one’s portfolio due to its risk aversive business model, upward earnings curve, handsome payouts and business growth. The stock offers an attractive FY13E dividend yield of around 14.4% at the market price of PkRs 39.85.