18% hike in consumer gas tariffs on cards
In a bid to pass-on the impact of expected surge in the wellhead gas prices amid
higher reference price of crude oil and currency decline, the consumer gas prices
in the country are proposed to be raised by 18% for all categories effective Jan 1,
2010. This is inline with our expectation as we have calculated an increase of
17.6% (excluding Qadirpur price resolution) in weighted average cost of gas
effective Jan 01, 2010. In the following, we have discussed the impact of gas price
increase on inflation and the various listed sectors at KSE.
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Wednesday, December 23, 2009
Pakistan Strategy Report December 2009 by JS Global
Macro: A year of stabilization
Post the commodity shock, Pakistan has undergone massive structural
adjustments mainly led by IMF’s guidelines. Though the fruits of reforms are
evident from the recent macro data as well as the ‘Stable’ outlook given by the
sovereign rating agencies, the deteriorating law & order situation and ongoing
global recessionary woes have prolonged the prospects of recovery, in our view.
The expected liquidity stimulus was delayed due to the non-fulfillment of Friends
of Pakistan’s commitments, US’s late approval of the Kerry-Lugar bill and a lag in
the release of the Coalition Support Fund. This in turn affected domestic liquidity
and kept short-term rates at higher levels, despite SBP reducing the policy rate by
250bps in 2009. Nevertheless, we term year 2009, as a year of achievement, as
Pakistan’s establishment has taken bold macro economic initiatives to eliminate
long-standing structural flaws by doing away with fuel & electricity tariff subsidies,
introducing banking and tax sector reforms and more. Interestingly, the reforms
carried out in 2009, have strengthened Pakistan’s economic governance when
compared to global economic power houses like China and India, as both
continue to subsidize power & fuel in their respective countries. The International
Finance Cooperation assigned Pakistan the 85th rank vis a vis China’s 89th and
India’s 133rd among countries in terms of ‘ease of doing business’ in 2010.
Click Here For Complete Research Report.
Post the commodity shock, Pakistan has undergone massive structural
adjustments mainly led by IMF’s guidelines. Though the fruits of reforms are
evident from the recent macro data as well as the ‘Stable’ outlook given by the
sovereign rating agencies, the deteriorating law & order situation and ongoing
global recessionary woes have prolonged the prospects of recovery, in our view.
The expected liquidity stimulus was delayed due to the non-fulfillment of Friends
of Pakistan’s commitments, US’s late approval of the Kerry-Lugar bill and a lag in
the release of the Coalition Support Fund. This in turn affected domestic liquidity
and kept short-term rates at higher levels, despite SBP reducing the policy rate by
250bps in 2009. Nevertheless, we term year 2009, as a year of achievement, as
Pakistan’s establishment has taken bold macro economic initiatives to eliminate
long-standing structural flaws by doing away with fuel & electricity tariff subsidies,
introducing banking and tax sector reforms and more. Interestingly, the reforms
carried out in 2009, have strengthened Pakistan’s economic governance when
compared to global economic power houses like China and India, as both
continue to subsidize power & fuel in their respective countries. The International
Finance Cooperation assigned Pakistan the 85th rank vis a vis China’s 89th and
India’s 133rd among countries in terms of ‘ease of doing business’ in 2010.
Click Here For Complete Research Report.
VALUE SEEKER by Invest Cap Wednesday, December 23, 2009
Gas price hike - winners & losers
Highlights
GDCs: A tool for revenue & cash flow improvement
Not Good for Cement, Fertilizer to remain resilient, Neutral for Power
Economic implications - inflation to cross 10% easily in FY10
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Highlights
GDCs: A tool for revenue & cash flow improvement
Not Good for Cement, Fertilizer to remain resilient, Neutral for Power
Economic implications - inflation to cross 10% easily in FY10
Click Here For Complete Research Report.
Tuesday, December 22, 2009
MORNING BRIEFING by JS December 22, 2009
BAFL: Earnings revision/Upgrade to ‘Buy’
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We have revised our earnings estimates for Bank
Alfalah post its nine month results and better
earnings outlook for the fourth quarter. Although the
9M2009 earnings remained subdued, better offtake
in the fourth quarter along with the expected FSV
benefit will help the bank post strong 4th quarter
earnings, in our view. Moreover, potential near term
triggers in the shape of possible divestment in Warid and
Wateen, have helped the scrip become the volume leader
amongst banks in the current year. After taking into account
the latest financials, along with improved offtake figures, we
have adjusted our BAFL earning estimates for 2009 to
Rs1.9/share (Rs1.6/share earlier) and upgraded our stance
on the scrip to ‘Buy’ with a revised target price of Rs17.
Click Here For Complete Research Report.
Morning Shout by KASB Securities 22 December 2009
Cement: Mapping 2010 opportunities
Cement dynamics remain weak as 1HFY10 draws to a close. We maintain our
cautious stance on the sector and re-iterate concerns on 2QFY10 profitability.
Uncertainly should continue in 2HFY10 as (1) domestic prices continue to move
sideways; (2) anticipated domestic demand pick-up has not really materialized; (3)
export prospects look increasingly uncertain; and (4) energy costs are rising.
That said, we highlight potential turning points in 3QFY10 and beyond which could
improve the outlook for Pak cement space. Foremost is return to historical
consensus pricing model which can support earnings despite low demand.
The alternate case is potential changes in industry structural dynamics as smaller
manufacturers either temporarily bow out of the market till better pricing dynamics
materialize or are acquired by larger players backed by strong groups.
While demand uptick is a possible route we remain unexcited on this score, as
sizeable supply overhang requires overall demand growth of +12% p.a for 2-yrs
(21% avg required domestic demand growth, in our view).
Click Here For Complete Research Report.
Cement dynamics remain weak as 1HFY10 draws to a close. We maintain our
cautious stance on the sector and re-iterate concerns on 2QFY10 profitability.
Uncertainly should continue in 2HFY10 as (1) domestic prices continue to move
sideways; (2) anticipated domestic demand pick-up has not really materialized; (3)
export prospects look increasingly uncertain; and (4) energy costs are rising.
That said, we highlight potential turning points in 3QFY10 and beyond which could
improve the outlook for Pak cement space. Foremost is return to historical
consensus pricing model which can support earnings despite low demand.
The alternate case is potential changes in industry structural dynamics as smaller
manufacturers either temporarily bow out of the market till better pricing dynamics
materialize or are acquired by larger players backed by strong groups.
While demand uptick is a possible route we remain unexcited on this score, as
sizeable supply overhang requires overall demand growth of +12% p.a for 2-yrs
(21% avg required domestic demand growth, in our view).
Click Here For Complete Research Report.
Morning Shout by KASB Securities 21 December 2009
Domestic Liquidity holds the key
Domestic liquidity (M2) has failed to keep pace with growth in monetary base in Jul-
Nov 09, 4.2% vis-à-vis 13.2%, on the back of a decline in money multiplier. We
believe this could be seasonal and should normalize somewhat going forward.
Credit distribution on the other hand has remained skewed towards the government
at the cost of private sector. We believe this needs to normalize towards the private
sector in order to buttress the recovery process.
The normalization of credit now hinges on sequential improvement in NFA of the
Central Bank amid cash reversals into the system as budget monetization is not
exercisable under the IMF program to fill the liquidity gap.
News flow suggests domestic liquidity could receive a boost with receipts from US of
US$850mn by Dec-09 (KL and CSF). The caveat is govt. borrowing from the SBP.
Click Here For Complete Research Report.
Domestic liquidity (M2) has failed to keep pace with growth in monetary base in Jul-
Nov 09, 4.2% vis-à-vis 13.2%, on the back of a decline in money multiplier. We
believe this could be seasonal and should normalize somewhat going forward.
Credit distribution on the other hand has remained skewed towards the government
at the cost of private sector. We believe this needs to normalize towards the private
sector in order to buttress the recovery process.
The normalization of credit now hinges on sequential improvement in NFA of the
Central Bank amid cash reversals into the system as budget monetization is not
exercisable under the IMF program to fill the liquidity gap.
News flow suggests domestic liquidity could receive a boost with receipts from US of
US$850mn by Dec-09 (KL and CSF). The caveat is govt. borrowing from the SBP.
Click Here For Complete Research Report.
Weekly Update Market Monitor By KASB
News This Week
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- NWFP share in NFC award up by PRs61bn
- PM reshuffles ministers’ portfolios
- SBP mops up PRs25.7bn in T-bill auction
- Current account deficit declined to US$1.35bn in Jul-Nov 09
- 1QFY10 LSM production declined
- Nishat Mills announces acquisition of AES Pakistan assets
- Stock Market Overview
- The KSE-100 Index witnessed a WoW rise 1.62% to close at 9,183.73 on
- Friday. Volumes also increased by 66.85% to average 162.48mn shares.
- Gharibwal Cement, Pakistan Services, Faysal Bank, Bank of Punjab and Atlas
- Honda were major gainers while Javedan Cement, PICT, Nakshbandi
- Industries, Meezan Bank and Rafhan Maize were major losers at KSE this week.
Click Here For Complete Research Report.
Invest Cap VALUE SEEKER Monday, December 21, 2009
Decelerating NPLs point to improving asset quality
Highlights
•Banking NPLs increased by 6% QoQ to Rs422bn in Sep-09
•Restricted economic activity justifies slow cash recoveries
•4QCY09 depicts improved picture
Click Here For Complete Research Report
Highlights
•Banking NPLs increased by 6% QoQ to Rs422bn in Sep-09
•Restricted economic activity justifies slow cash recoveries
•4QCY09 depicts improved picture
Click Here For Complete Research Report
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