During the week ended 8th March 2019, the benchmark index of Pakistan Stock Exchange (PSX) declined by 1.5%WoW, extending the losing streak to five weeks. The total liquid foreign exchange reserves held by Pakistan were reported at US$14,956.2million on 1st March 2019. Reserves held by State Bank of Pakistan (SBP) were reported at US$8,116.5 million and net reserves held by commercial banks at US$6,839.7 million. Reserves held by SBP increased by US$80 million. The investors remained on the sidelines as uncertainty emanating from Indo-Pak confrontation as well as sector specific impact of economic reforms package on heavy weights kept investors jittery. Sector-wise the worst performers for the week were E&Ps and Commercial Banks. The banking sector remained under pressure due to the super tax clause in the economic reforms package. As against this, auto assemblers added the most points to the index during the week due to the removal of law barring non-tax filers from purchasing cars. Foreigners were net sellers of US$3.5 million as against net seller of US$1.33 million a week ago. On the local front Mutual Funds were also net sellers of US$10.6 million. Apart from easing of border tensions, the market was also driven by news like: 1) issue of Power Sukuk of Rs200 billion, 2) Government action against banned outfits and 3) positive development regarding FATF negotiations. However, passing of second mini-budget, failed to generate investors’ interest in equities. Participation remained dull with average daily trading volumes for the week falling to 114.2 million shares as compared to 152.4 million shares a week ago. Major participation was witnessed in BOP, due to above expectation dividend of Rs0.75/share. Sector performance can be tagged to second mini-budget announcement with Automobile assemblers leading with +5%WoW (on removal of non-filer ban) where heavy-weights witnessed shrinking market capitalization. The top performers included: PSMC, INDU, KAPCO and HBL; whereas laggards were: ASTL, OGDC, HUBC, PIOC and MCB. Analysts expect the market to remain range bound next week with automobile players continuing to garner investors’ interest. They also believe volumes to remain low, until clarity emerges on the economic front, with approval of package by IMF remaining the key trigger.
Local cement dispatches during February 2019 declined by 19.0%YoY due to overall economic slowdown and a consequent decline in spending on infrastructure development. Added to the miseries was continued snow/rainfall resulting in a sequential decline by 8.1%. The decline was more pronounced in North (local dispatches down by 25.2% YoY), while private sector demand was 9.9%YoY higher in South. For 8MFY17, total cement dispatches were flat at 30.1 million tons. Exports remained buoyant as the local players in South are capitalizing on the shortfall of clinker capacity in Sri Lanka and Bangladesh while the provisional data indicates increasing share of export in the sales. CHCC and DGKC stood out on the provisional numbers with both the companies increasing their market share in February 2019 on the back of significant capacity expansion. Construction activity is expected to improve with the commencement of summer. However long-term outlook doesn’t look bright.
February volumetric offtake of energy products was reported at 1.43 million tons, with furnace oil (FO) sales declining by 52%MoM/31%YoY), while MOGAS/HSD offtake improving by 2% and 9%MoM and 16% and declining 1%YoY. Cumulative 8MFY19 volumes were reported at 12.1 million tons, receding 26%YoY due to a weaker demand of power sector, posting cumulative dip of 60%YoY in FO sales. The monthly average sales dipped to 247,000 tons as compared to 610,000 tons during 8MFY18). Non-FO sales also declined by 12%YoY, highlighting continued subdued demand. The market share of leading companies was reported at PSO (40%), APL (9%) and HASOL (10%) during January 2019. The decline in FO is likely to reverse in the near term as peak power demand during summer would render generation from FO based plants. However, retail fuels are expected to continue with more-of-the-same on the back of muted economic activity. Analysts recommend taking positions in the OMCs, anticipated to gain from circular debt clearance.
Bank Alfalah (BAFL) has posted profit after tax of Rs10.6 billion (EPS: Rs5.98) for CY18 as compared to Rs8.3 billion (EPS: Rs4.72) for CY17. It held a briefing for analyst and the key takeaways were: 1) Central Bank of Afghanistan had declined the application of Azizi Bank for the acquisition of BAFL’s Afghanistan operations. The management updated that the operations are back to ‘Business as usual’ mode, 2) BAFL recorded a provisioning expense of Rs1.00 billion against a specific customer from the power sector, which the management stated to be of subjective nature, 3) the recovery line is still present to counter any provisioning charge due to depletion in asset quality in CY19, 3) the management expects single digit advances growth in CY19 after recording 25% jump in advances in CY18. Considering the current economic environment the Bank plans to cautiously move further in SME and low cost housing financing, 4) CASA dropped to 75.4% in CY18 as compared to 76.9% for CY17, as the Bank opted for higher cost deposits to capitalize on available market opportunities, 5) Islamic banking operations witnessed a growth of 54% during last year, 6) the Bank is expected to record prior year super-tax charge in the results for 1QCY19, however, WWF provision reversal is dependent on legal opinion and 7) Administrative costs remained flat at Rs25 billion for CY18. The management expects administrative costs to pick-up due to bank’s branch expansion initiative in CY19.
Philip Morris Pakistan (PMPK) announced its 2018 financial results and reported EPS of Rs1.6 (Adjusted for preference dividend) as compared to LPS of Rs1.89 a year ago. The increase in profitability can be attributed to 80bpsYoY higher gross margin, a 16%YoY higher sales and a 59%YoY increase in other income.
BATA Pakistan (BATA) declared its financial results for 2018 reporting EPS of Rs198.6 as against an EPS: 201.7 a year ago. EPS decreased by 1.5%YoY mainly due to 19% increase in distribution cost and 13% increase in administrative expenses.