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Karachi, April 12, 2013 (PPI-OT): ICH rates on PTC’s LDI segment booked throughout 1QCY13 As PTC’s BoD meeting is to be held on 14th of April (Sunday) and 1QCY13 results to be announced the following working day, Arif Habib Limited are expecting PTC (on consolidated basis) to post a PAT of PKR 5.76bn (EPS PKR 1.13) for 1QCY13, on account of higher LDI rates being charged, since Oct-12.
According to Arif Habib Limited in comparison with 4QCY12, which saw PTC book a massive EPS of PKR 1.85, other than jump in LDI revenues this was also due to certain one-offs that impacted EPS (reversal in the VSS expense of ~PKR 1.53bn with positive EPS impact of PKR 0.20).
In addition, there lower taxation charge in the 4QCY12 (18% instead of a usual 39%) was due to the tax benefits enjoyed through the VSS scheme, that impacted EPS by another PKR 0.40. Therefore, on a core EPS basis, the company is expected to post only a slight decline on QoQ basis, while a huge increase on YoY basis of 141% (PKR 0.47 in 1QCY12).
| Financial Highlights (PKR mn) | 1QCY13E | 4QCY12 | QoQ | 1QCY12 | YoY |
| Net Sales |
32,115 |
33,514 |
-4% |
28,255 |
14% |
| Gross Profit |
15,626 |
14,686 |
6% |
9,844 |
59% |
| GP Margin |
49% |
44% |
35% |
|
|
| Other Income |
1,031 |
1,032 |
0% |
703 |
47% |
| Finance Cost |
1,130 |
991 |
14% |
797 |
42% |
| Profit after tax |
5,764 |
9,443 |
-39% |
2,393 |
141% |
| EPS/(LPS) |
1.13 |
1.85 |
-39% |
0.47 |
141% |
Source Company Financials and Arif Habib Research
| Product Portfolio as of 2HCY13 Accounts | Market Share | % of Total Revenue (approx) |
| Fixed and Wireless Local Loop (FLL and WLL) | 72% (approx) | 34% |
| Cellular Services (Ufone) | 20% | 41% |
| Broadband (DSL and EvDO) | 60% | 12% |
| Long Distance Intl (LDI) | 50% | 14% |
| Microfinance Bank (U Bank) | n/a | 0.01% |
Source: PTA Statistics and Arif Habib Research
LDI Minutes in 1QCY13 and Ufone revenues
Arif Habib Limited forecasts for 1QCY13 is based on the actual incoming int’l minutes for Jan- Feb’13 with estimated 550mn minutes for Mar’13; Arif Habib Limited has witnessed a 44% decline in LDI minutes, from Oct-Dec’12 numbers, as grey trafficking has been on the rise.
However, to compensate to certain extent for this decline in LDI minutes, Ufone revenues are expected to have normalized from the levels prior to 4QCY12 as the gov’t had withdrawn SIM sales ban at the retail outlets of cellular phone operators as well as due to lesser mobile network blockages occurring.
Recommendation
Based on the assumption that the total LDI minutes will mature around the monthly 650mn mark on average during CY13, with 1QCY12 earnings and further better expected quarter earnings going forward (CCP intervention on the ICH will further linger), Arif Habib Limited maintains a “BUY” recommendation on PTC with Arif Habib Limited Jun-end price target at PKR 29.7/share, offering a attractive upside of 38% from current levels.