Morning Briefing for December 17, 2013 – Standard Capital

Karachi, December 17, 2013 (PPI-OT): PE exposition till 7x (some options left)

Standard Capital sees some blue chips are trending PEs i.e. 9x – 10x as against expected KSE100 PE of 10.9x.

According to Standard Capital, nevertheless, Standard Capital sees continuous developments in related sectors wherein government is vying for public spending. Standard Capital likes governments’ supply side antics. At the same time Standard Capital sees overall market risk of Pakistan to decrease given continuity in democratic disposition wherein valuations are still compelling.

Standard Capital is highlighting options which are still available till PE of 7x excluding textile spinning options (to be deliberated in next report).

Some attractive options deciphering lower PE

Company Name                 Expected          Dividend   Return On
                                PE      PBV     Yield      Equity
Century Paper and Board        3.1      0.8      0.0        15.9
Mari Petroleum                 3.4      1.4      1.0         9.7
Adamjee Insurance              4.1      0.4      6.7         5.4
Archroma Pakistan (CPL)        4.2      2.1      7.1        32.4
Nishat Mills                   4.7      0.7      3.4         9.9
Arif Habib Corporation         4.8      0.4     11.3         5.5
Cherat Cement Company          4.8      1.4      4.6        33.0
Kohat Cement                   4.9      2.4      5.4        43.6
Nishat Power                   5.0      1.2      9.8        29.8
Pak Re-Insurance                5.5      1.2      9.3        16.8
Faysal Bank                    5.6      0.5      0.0         6.8
Kohinoor Energy                6.0      0.9     34.0        11.8
Pak Suzuki Motor               6.1      0.7      1.7         6.2
Nishat Chunian Power           6.2      1.7     17.6        37.7
International Industries       6.3      0.9      7.0         9.3
Netsol Technology              6.9      0.6      2.3        18.9
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The ex-bonus PE of AICL comes out at 4.1x wherein some of the other companies such as newly named Archroma Pak (CPL) still provide best option since it is being one of the best provider of textile processing chemical, as per Standard Capital’s experience.
Among others Standard Capital likes CHCC (expansion antics; cost efficient). Standard Capital also sees NML to take benefit of GSP+ since it caters to most of the items mentioned in the scheme directed in the lucrative EU market. In the financial sector Standard Capital sees privatization play in PAKRI which depends on core underwriting re-insurance results.

In the banking sector Standard Capital likes Faysal Bank wherein capital rejuvenation is a strong trigger w.r.t Basel-III where capital maintenance requirement is stated to be enhanced.