JS Securities Limited – Market Wrap

Karachi, May 20, 2015 (PPI-OT): KSE-100 Today – Key information


KSE – 100 Index
KSE-100 Index (May 20, 2015) 32,599.00
Change from last closing (130.55)
Change from last closing (%) -0.40%
YTD (Since Dec 31, 2014) 1.46%
12 Month High (Feb 03, 2015) 34,826.51
12 Month Low (Aug 28, 2014) 27,774.43
12 Month Average 31,254.29

KSE Market Capitalization
KSE Market Capitalization (May 20, 2015)(Rs. bn) 7,101.20
KSE Market Capitalization (US$ bn) 69.66
Change from last closing (%) -0.28%
YTD (Since Dec 31, 2014) -3.78%
12 Month High (Feb 03, 2015)(Rs. bn) 7,896.82
12 Month Low (Mar 30, 2015)(Rs. bn) 6,509.02
12 Month Average (Rs. bn) 7,165.97

KSE Ready Turnover
Total Volume (May 20, 2015)(Shares mn) 135.62
Total Value (Rs. bn) 7.26
Total Value (US$ mn) 71.25
12 Month Avg. Daily Vol. (Shares mn) 205.05
12 Month Avg. Daily Value (Rs. bn) 10.81
12 Month Avg. Daily Value (US$ mn) 106.85

KSE – 30 Index
KSE-30 Index (May 20, 2015) 20,738.84
Change from last closing (79.09)
YTD (Since Dec 31, 2014) -0.16%
12 Month High (Feb 03, 2015) 22,614.13
12 Month Low (Mar 30, 2015) 18,371.59
12 Month Average 20,724.88

Regional Markets Today’s Previous % YTD
China (SSEA) 4,446.29 4,417.55 0.65% 37.46%
India (BSESN) 27,837.21 27,645.53 0.69% 1.23%
Indonesia (JKSE) 5,292.75 5,269.37 0.44% 1.26%
Korea (KOSPI) 2,139.54 2,120.85 0.88% 11.69%
Malaysia (KLSE) 1,810.11 1,809.72 0.02% 2.77%
Philippines (PSI) 7,881.93 7,871.31 0.13% 9.01%
Taiwan (TWII) 9,685.31 9,716.77 -0.32% 4.06%

Top Gainers in KSE-100 Price Price %
ID Indus Dyeing Manufacturing Co. Ltd. 840.00 37.08 4.62%
Kohinoor Energy Limited 45.84 0.85 1.89%
Habib Metropolitan Bank Limited 30.54 0.45 1.50%
The Searle Company Limited. 254.87 2.99 1.19%
Engro Foods Ltd. 134.83 1.58 1.19%

Top Losers in KSE-100 Price Price %
Ibrahim Fibre Limited 73.77 (3.87) -4.98%
Fatima Fertilizer Company 35.63 (1.85) -4.94%
Shifa International Hospitals 252.62 (12.38) -4.67%
IGI Insurance Limited 212.08 (6.40) -2.93%
Mari Petroleum Company 431.01 (11.58) -2.62%

Volume Leaders Price Vol (mn) Val (Rs mn)
Fatima Fertilizer Company 35.63 18.02 650.55
Engro Fertilizer 84.95 12.56 1,059.20
Byco Petroleum Limited 13.29 12.43 169.13
K-Electric Ltd. 7.31 7.97 58.51
Ghani Automobile Industries Limited 7.29 6.66 49.47

KSE Futures Today’s Previous Today’s Previous Today’s
Details Vol.(mn) Vol.(mn) Val.(mn) Val.(mn) Spread
ENGRO-MAYB 2.01 1.27 554.60 354.70 12.44%
EFERT-MAY 2.31 1.16 195.25 98.85 7.87%
PAEL-MAY 3.02 4.70 187.30 290.03 11.27%
DGKC-MAY 1.06 1.03 130.92 127.14 12.10%
EFOODS-MAY 0.83 1.00 111.93 135.47 13.89%
LUCK-MAY 0.14 0.14 60.61 63.38 8.66%
MLCF-MAY 0.72 1.14 44.94 71.11 12.31%
TOTAL 13.36 14.54 1,483.85 1,384.09 11.59%

KSE Valuation Price PE14E PE15F Div.Yield 14 Div.Yield 15
OGDC 186.04 6.46 8.31 4.97% 5.38%
PTC 20.55 17.13 9.31 7.30% 9.73%
NBP 56.87 8.05 8.29 9.67% 8.35%
PSO 360.80 4.49 6.23 2.02% 2.02%
MCB 265.07 12.13 10.03 5.28% 6.22%
FFC 138.91 9.73 9.37 9.83% 10.15%
POL 373.83 6.86 9.12 14.04% 10.70%
LUCK 443.81 12.65 11.31 2.03% 2.25%
JS Universe 8.35 7.36 5.68% 6.30%

May Contract
Open Interest Contr Today’s Previous Today’s Previous
Details ol. al. Vol.(mn) Vol.(mn) Val.(mn) Val.(mn)
PAEL-MAY 24.41 24.52 1,555.12 1,561.90
ENGRO-MAYB 4.64 4.50 1,382.44 1,346.71
EFERT-MAY 8.20 8.46 720.46 742.55
DGKC-MAY 3.80 3.99 503.20 524.70
EFOODS-MAY 3.15 3.13 468.37 466.92
MLCF-MAY 4.90 4.92 317.49 318.70
FCCL-MAY 8.51 8.48 291.36 290.66
LUCK-MAY 0.58 0.58 279.40 279.10
PSO-MAYB 0.64 0.67 243.58 253.81
ATRL-MAY 0.88 0.88 187.37 187.97
BOP-MAY 16.64 16.38 164.12 161.76
SEARL-MAY 0.56 0.58 147.42 151.35
PPL-MAY 0.68 0.69 122.94 123.89
AICL-MAY 2.37 2.39 110.92 111.90
NBP-MAY 1.73 1.75 106.32 107.51
TOTAL 103.33 103.64 7,338.51 7,365.48

JS Securities Limited – KSE fails to gain traction in spite of encouraging S and P and Moody’s review

Karachi, May 08, 2015 (PPI-OT): In spite of S and P raising outlook on Pakistan to positive from stable and Moody’s flagging Pakistan’s improving external liquidity position in its latest report, the equity markets failed to gain traction during the outgoing week. This was largely due to (1) one notch higher political uncertainty after the disqualification of the Railways Minster and (2) news flows suggesting a tax-heavy upcoming Federal Budget.

However, the Oil and Gas sector attracted investors’ interest on hydrocarbon discoveries and recovery in international crude oil prices. Hence, the benchmark KSE-100 index closed 0.6% WoW down at 33,530 with trading activity dropping by 26% WoW to 187mn shares/day. However, foreigners remained net buyers worth US$12mn vs. net buying of US$21mn in the preceding week.

Other key highlights of the week were: (1) Pakistan and IMF starting talks on the seventh review under the EFF, (2) Pakistan likely to issue US$1bn in Eurobonds in FY16, (3) Cotton arrivals clocking in 11% YoY higher at 14.87mn tons in FY15, (4) Engro’s Elengy Terminal failing to qualify for Pakistan’s second LNG terminal and (5) Ministry of Finance approving merger of KASB Bank into Bank Islami.

S and P raises Pakistan’s outlook to positive

Standard and Poor’s (S and P) raised Pakistan’s credit rating outlook to positive from stable, as lower energy costs and an IMF loan boost growth and improve finances. The positive outlook reflects expectations of Pakistan’s improved economic growth prospects, fiscal and external performance, and the supportive relationship of external donors. S and P affirmed the country’s B- rating and raised the 2015-2017 average growth projection to 4.6% from 3.8%.

Apr 2015 CPI drops to 2.1% YoY

CPI inflation for April 2015 clocked in at 2.1% YoY vis-à-vis 2.5% YoY recorded last month. This low CPI Inflation was mainly attributed to (1) lower fuel prices and (2) decline in prices of Perishable Food items. Overall in 10MFY15, CPI inflation stands at a modest 4.8% YoY versus 8.7% YoY in 10MFY14.

Cement: Sales up 3.9% YoY in 10MFY15

Overall cement sales in Apr 2015 clocked in 2.6% YoY and 9.7% MoM higher at 3.29mn tons. On a YoY basis, 4.6% YoY higher local offtake led overall demand growth in Apr 2015; while on a MoM basis exports picked up by 44% on the back of improving dynamics for manufacturers-based in North of Pakistan. In 10MFY15, overall cement sales clocked in 3.9% YoY higher at 29.08mn tons where local sales jumped by 8.0% YoY while exports declined by 9.1% YoY.

JS Securities Limited – Government has potentially raised deemed duty on HSD for refineries

Karachi, May 04, 2015 (PPI-OT): As per media reports, ECC has raised regulatory duty on High Speed Diesel (HSD) for refineries from 7.5% to 10% effective from Jun 1, 2015. JS Securities Limited understands, as per JS Securities Limited’s discussions with some industry sources, this is the deemed duty the government has raised.

The move which comes as a surprise is likely to lead to earnings accretion for Pak Refineries. However, ambiguity over the matters remains over the application of the same as 2% regulatory duty has also been imposed on import of crude oil and petroleum products.

JS Securities Limited estimates if the deemed duty has been raised, Attock Refinery (ATRL) and National Refinery (NRL) can witness potential annual earnings upside of ~Rs8.5/share and ~Rs12.0/share respectively.

JS Securities Limited believes along with presently prevailing high GRMs, increase in deemed duty is likely to lift near-term earnings outlook for refineries.

JS Securities Limited turns ‘Over-Weight’ on refineries, with ATRL JS Securities Limited’s top pick in the sector.

JS Securities Limited – FABL: 1Q2015 EPS stood at Rs1.57, up 4.3x YoY

Karachi, April 29, 2015 (PPI-OT): Faysal Bank Ltd (FABL) announced its 1Q2015 result today posting a PAT of Rs1.88bn (EPS: Rs1.57), against PAT of Rs433mn reported in 1Q2014. Headline earnings surpassed JS Securities Limited’s expectations of Rs0.57/share on the back of whopping Gain on Sale of Securities of Rs1.27bn against Rs95mn in 1Q2014, however core operations came in line with JS Securities Limited’s expectations.

Key drivers of robust earnings were (1) 2x jump in Non Interest Income, (2) 63% YoY decline in provisions and (3) 11% YoY decline in operating expenses. Cost to income for FABL for 1Q2015 clocked in at 47% against 71% in 1Q2014, with major contribution from non-core income. Earnings also increased sequentially by 77% QoQ on the back of (1) higher capital gains and (2) controlled costs.

At current levels the stock is trading at 2015E P/B of 0.68x.

JS Securities Limited – NBP: 1Q2015 EPS stood at Rs1.54

Karachi, April 29, 2015 (PPI-OT): National Bank of Pakistan (NBP) announced its 1Q2015 result today posting a PAT of Rs3.28bn (EPS: Rs1.54), against PAT of Rs3.15bn reported in 1Q2014. Core earnings net of provisions came in line with JS Securities Limited’s expectations; however surprise to the street was the hefty gains on sale of securities.

NBP clocked in 4% YoY growth in 1Q2015 bottom-line owing to (1) 22% YoY jump in net interest income (NII) and (2) 40% YoY growth in non-interest income. The expected bulky provisions of Rs3.3bn were netted by the non-recurring capital gains of Rs3.5bn.

At current levels the stock is trading at 2015E P/B of 0.70x, respectively. JS Securities Limited maintains JS Securities Limited’s ‘Hold’ call on the stock with a Target Price of Rs68.

JS Securities Limited – Oil sector lead market gains, KSE-100 up 3% WoW

Karachi, April 10, 2015 (PPI-OT): The Karachi Stock Exchange (KSE) extended last week’s gains to close the week 3% WoW higher at 32,351 with trading volumes averaging at 240mn shares/day (-5% WoW). Foreigners turned net sellers during the outgoing week, with net foreign selling of US$6mn vis-à-vis net buying of US$4mn the preceding week. Heavy-weight Oil and Gas sector rallied led by discovery of hydrocarbon reserves in Mardankhel (Tal Block) and uptick in international oil prices, while Cements and Fertilizers stocks gained as the government once again delayed the gas tariff hike.

The book-building for the Secondary Public Offering (SPO) of Habib Bank Limited (HBL) was also completed during the week, where Government of Pakistan is initially offering 250mn shares at a floor price of Rs166. Other key highlights of the week were: (1) Chinese President postponing his trip to Pakistan due to a fragile situation in Yemen, (2) Government announcing Power Policy 2015, (3) Government considering introduction of uniform gas tariff, (4) Cement dispatches rising by 4% YoY in 9MFY15 and (5) OMCs sales growing by 17% YoY in March 2015.

Discovery at Mardankhel – POL major beneficiary

Pakistan Oilfields Limited (POL) along with its partners (OGDC, PPL) has successfully discovered additional hydrocarbon reserves at Mardankhel-1’s (Tal Block) Lumshiwal formation. The well successfully tested 2,105bpd of oil and 24.01mmcfd of gas. Based on initial tests results (assuming US$55/bbl), the additional production is likely to have positive earnings impacts of ~Rs4.3/share for POL, ~Rs0.7/share for PPL and ~Rs0.3/share for OGDC. The cumulative production tested so far is 2,621bpd of oil and 37mmcfd of gas.

Ministry seeks Rs20bn to clear PSO’s, IPPs’ dues

Ministry of Water and Power has reportedly sought Rs20bn from the Ministry of Finance for making payments to Pakistan State Oil (PSO) and Independent Power Producers (IPPs) on account of Tariff Differential Subsidy (TDS). The government has already exhausted the Rs179bn of power subsidy budgeted for FY15.

Govt. considering introduction of uniform gas tariff

According to news reports, government is considering introducing a uniform gas tariff of Rs750/mmbtu for all sectors from July-2015. However, gas tariff for a few Gencos, domestic consumers and new fertilizer plants is expected to remain constant.

JS Securities Limited – Morning Briefings

Karachi, March 27, 2015 (PPI-OT): Banks: 1-7% drag on valuations by 50bps discount rate cut

JS Securities Limited continues to like Pak Banks despite another 50bps cut in discount rate by the State Bank of Pakistan (SBP). JS Securities Limited believes recent underperformance of the banking sector remains unjustified given a muted 1-7% valuations impact driven by -2.2% to +0.9% earnings revision for 2015E and -5.3% to +0.6% for 2016F. JS Securities Limited flags the magnitude of monetary easing impact on Pak Banks has shrunk post linkage of Minimum Deposit Rate (MDR) to the interest rate corridor.

JS Securities Limited’s top picks amongst Pak Banks are United Bank Limited (UBL, TP: Rs248) and Allied Bank Limited (ABL, TP Rs148), as they trade at 2015E P/B of 1.24x and 1.22x, respectively. Introduction of the Target Rate (TR) remains a key risk for the sector, which can potentially wipe out banks’ 2016F profitability by an average 16%.

Monetary easing concerns overplayed, TR remains a risk

JS Securities Limited continues to like Pak Banks despite another 50bps cut in discount rate by the State Bank of Pakistan (SBP). JS Securities Limited believes recent underperformance of the banking sector remains unjustified given a muted 1-7% valuations impact driven by -2.2% to +0.9% earnings revision for 2015E and -5.3% to +0.6% for 2016F on the back of shift in sizable high-yielding assets to low-yielding assets during 2016.

JS Securities Limited flags the magnitude of monetary easing impact on Pak Banks has shrunk post linkage of Minimum Deposit Rate (MDR) to the interest rate corridor. JS Securities Limited’s top picks amongst Pak Banks are United Bank Limited (UBL, TP: Rs248) and Allied Bank Limited (ABL, TP Rs148), as they trade at 2015E P/B of 1.24x and 1.22x, respectively.

However, introduction of the Target Rate remains a key risk for the sector. Contrary to expectations, SBP did not mention the Target Rate in its Monetary Policy Statement (MPS), which can potentially wipe out banks’ 2016F profitability by an average 16%. However, SBP still has three more MPS announcements before its deadline to introduce the Target Rate.

Varying impact of monetary easing on banks’ profitability

JS Securities Limited believes monetary easing affects Faysal Bank (FABL) profitability the most relative to peers as the bank (1) has a lower share of PIBs in total assets, (2) a higher ADR and (3) a low savings to deposit ratio (resulting in lower cost savings). On the other hand, JS Securities Limited expects UBL and NBP to be the least affected due to their (1) lower share of MTBs in total assets and (2) higher contribution from non-interest income.

Valuations drop in tandem; but impact remains muted

Similarly, valuation impact varies from bank to bank due to their distinct asset maturity profiles. ABL’s valuation declines the most within JS Securities Limited’s coverage on diminishing ROE given (1) high re-investment risk because of hefty investments in PIBs and (2) lower savings deposits together with high zero-cost deposits. That said valuation impact on UBL remains muted owing to (1) least re-investment risk amongst peers, (2) presence of higher foreign operations and (3) increasing contribution from fee-based income.
FX reserves to cross US$18bn by year-end

Pakistan’s foreign exchange reserves posted a decline of US$142mn during the last week because of external debt payments. The country’s total foreign exchange reserves stood at US$16.13bn on March 20, 2015 compared to preceding week’s reserves of US$16.27bn. Meanwhile, the Finance Minister has said that country’s foreign exchange reserves are likely to hit US$18.2bn by 2015-end.