AKD Quotidian about — PSO: 1QFY13 Result Preview

Karachi, October 25, 2012 (PPI-OT): Pakistan State Oil is scheduled to announce its 1QFY13 result later today.

According to AKD Securities expects the company to announce NPAT of PKR 2.83 billion against NPAT of PKR 2.48 billion in the same period last year. The result translates into EPS of PKR 13.72 against EPS of PKR 12.08 in the corresponding period last year, up 14%YoY. Gross profit is expected to increase 28%YoY to PKR 9.8 billion led by higher absolute marketing margins and PKR 966 million in positive NRV adjustments on inventory at a 50% storage utilization rate. That said, AKD Securities has assumed PSO to include partial mid-summer losses on inventory for the current quarter. Earnings can deviate based on inventory mark-to-market as well as spread realization on circular debt. Alongside the result, PSO may announce an interim DPS of PKR 2- PKR 3/share. At current market price, the stock trades at a discount of 43% from fair value. However AKD Securities believes near-term price underperformance is likely to continue with low payouts and continuing circular debt accretion.

UBL: 9MCY12 Result Preview

UBL is scheduled to finalize its 9MCY12 result on Oct 31’12. On consolidated basis, AKD Securities expects UBL to post NPAT of PKR 13.58 billion (EPS: PKR 1.10) in 9MCY12 vs. NPAT of PKR 10.60 billion (EPS: PKR 8.66) in 9MCY11, up 28%YoY. AKD Securities expects an interim cash dividend of PKR 1/share alongside results, bringing cumulative 9MCY12 dividend to PKR 4/share. Key highlights of upcoming 9MCY12 results are expected to be 1) 4%YoY decline in NII, 2) a sharp 70%YoY decline in provisions, 3) 15%YoY growth in non-interest income driven by higher fees and 4) 16%YoY increase in non-interest expenses. Profit from associates (asset management subsidiary) is expected to materially contribute to UBL’s bottom line going by recent precedence and a performing domestic equity market. In 3QCY12, AKD Securities expects UBL to post NPAT of PKR 4.20 billion (EPS: PKR 3.43), flat YoY but down by 7%QoQ. The sequential decline is likely to emanate on the back of lower NII due to tighter NIMs and an uptick in loan provisions as coverage has room for improvement. Having gained 43%CYTD, UBL trades at a CY13F P/B of 0.89x and P/E of 5.1x where AKD Securities’ target price of PKR 100/share offers 33% upside. In this regard, AKD Securities believes that the market has overplayed interest margin compression concerns where UBL is AKD Securities’ top pick in the Pakistan Banking space.

HBL: 9MCY12 Result Preview

HBL is scheduled to announce its 9MCY12 result on Oct 31’12. On a consolidated basis, AKD Securities expects HBL to post NPAT of PKR 17.33 billion (EPS: PKR 14.30) in 9MCY12 vs. NPAT of PKR 15.61 billion (EPS: PKR 12.88) in 9MCY11, up 11%YoY. AKD Securities does not expect any payout alongside these results (1HCY12 dividend: PKR 3.5/share). Key highlights of upcoming 9MCY12 results are expected to be 1) 4%YoY NII growth primarily due to balance sheet growth, 2) a 46%YoY decline in total provisions with NPL stock stabilizing and coverage above 80%, 3) modest 7%VoV non-interest income growth with higher dividends countered by lower fx income and 4) contained 8%YoY increase in non-interest expenses. In 3QCY12 atone, AKD Securities expects HBL to post NPAT of PKR 5.60 billion (EPS: PKR 4.62) down by 2% on both YoY and QoQ basis. Regarding the latter, the sequential decline should arise on the back of lower NII even as provisions should witness a dip. That said, some support to the 3QCY12 bottom line should arise from normalization in effective tax rate (38% in 1HCY12). HBL is now the largest bank in Pakistan in terms of balance sheet size and absolute profitability. AKD Securities sees strong provisioning coverage (83%) and focus on cost control post prolonged VSS as key positives white capital strength (CY11 CAR: 15.6%) implies HBL has the potential to ramp up dividend payout, in AKD Securities’ view. HBL trades at a CY13F P/B of 0.92x and P/E of 5.2x where AKD Securities’ target price of PKR 123/share offers 16% upside. Accumulate!