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Monday, 30 July 2012

STOCK MARKET UPDATE: 31.07.2012

STOCK:
Karachi Stocks  Up 76.82  Points:
KARACHI, July 31: The KSE-100 index was at 14588.36, up 76.82 points.(today 10.42 am)

July 30, 2012
5 TOP GAINERS  &  LOOSERS:

UniLever Pak
Rs 368.00
Rafhan Maize
Rs (185.00)
Siemens Pakistan
Rs 32.69
Bata Pak
Rs (25.00)
Mithchells Frui
Rs 15.75
UniLever Food
Rs (25.00)
Millat Tractors
Rs 12.71
Nestle Pakistan
Rs (5.73)
Shezan Inter
Rs 11.02
Lucky Cement
Rs (5.44)
Karachi Stock 100-index loses 14 points
KARACHI, July 30: The Karachi stock market showed a lacklustre performance on Monday with the KSE-100 index marginally down by 14.87 points to 15,511.54 points.
Investors avoided taking firm position and instead took a cautious stance. Yet most were happy over the fact that the index did not drop below the 14,500 points level.
Some market participants still thought that a pre-result rally was possible once important issues on the political and economic fronts were settled.
Ahsan Mehanti at Arif Habib Corporation observed that the stocks closed lower on investor concerns for uncertain macroeconomic situation, security concerns in the city and country wide protests for power outrages.
Activity remained thin despite strong corporate earnings outlook and recovery in global stocks and commodities. Concerns for rising circular debt in the energy sector, revenue loss to fertilizer sector on gas supply worries and pending CGT collection issues played a catalyst role in bearish sentiment at KSE, said Mehanti.
Samar Iqbal, equity dealer at Topline Securities commented that the market remained range bound as investors preferred to stay on the sidelines during Ramazan. Cement stocks and Bank Alfalah witnessed heavy volumes.
Lucky cement saw profit taking as investors feared that the company’s dividend payout could be affected after acquiring ICI Pakistan while ICI closed at its upper cap due to possible tender offer.
Hasnain Asghar Ali, COO at Escorts Capital observed that improved volumes allowed the sideliners wider trading opportunities despite gloomier conditions on the economic and financial front.
The unveiling of draft of CGT mechanism, to be computed and collected by NCCPL with its approval expected early next month was likely to keep the local investors poised for opportunities.
However recent downgrading by international rating agencies, widening deficit, rising government borrowings and debt retirement, would continue to restrict the activity, which otherwise carries high potential, Hasnain said.
Technical calls for short term trade that usually follows better volumes were recommended while low running multiples of singled out stocks unaffected by the visible threat on financial front and due to gas supply shortage, could be looked for accumulation.
However, prolonged stagnation and relatively low volume made high priced stocks more vulnerable, which warranted caution.
The KSE-30 index fell by 14.23 points to 12,567.47 points. Turnover rose to 82m shares with trading value at Rs3.153 billion, from 58 million shares of the trading value of Rs2.111 billion last Friday.
Market capitalisation sliped to Rs3.707 trillion, from Rs3.709 trillion. Among the 280 active stocks, 123 gained, 134 fell while 23 remained unchanged.
The heaviest fall was noted in Rafhan Maize, which plunged by Rs185 to Rs3,525, followed by Bata (Pak) Ltd down by Rs25 to Rs675. On the rising side, UniLever Pak gained Rs368 to Rs7,728, followed by Siemens Pakistan up by Rs32.69 to Rs688.
The volume leader saw Bank Alfalah on the first place with 19m shares, traded up by 83 paisa to Rs18.89. DG Khan Cement gained 42 paisa to Rs46.32 on 10m shares, as investors swapped the stock for other cement share. Lucky Cement took a dip of Rs5.44 to Rs123.85 on 7m shares, Maple Leaf Cement was up by 27 paisa to Rs6.52 on 5m shares.
Arif Habib Corp added 22 paisa to Rs33.70 on 3m shares, Jah Sidd Co lost 18 paisa to Rs15.86 on 3m shares, Fatima Fertiliser shed 6 paisa to Rs24.41 on 3m shares; PTCL slipped 39 paisa to Rs13.87 on 2m shares, Engro Foods climbed by 67 paisa to Rs70.17 on 2m shares and Nishat Mills edged higher by one paisa to Rs52.71 on 2m shares.
Company News:
1) IMC launches partial payment scheme: KARACHI, July 30: Indus Motor Company (IMC) is introducing partial payment scheme on all of its Toyota variants from July 31.
Talking about terms and conditions for partial payments, Parvez Ghias, CEO IMC told a press conference on Monday that this option is available to individuals as well as corporate bodies with which the customer may make an initial payment of Rs250,000 for Corolla, Rs500,000 for Hilux and Rs10,00,000 for imported CBU vehicles through a pay order/demand draft in the name of IMC at the time of applying for booking of a vehicle.
He said that this scheme was provided as per desire of the government and Industry Ministry that auto industry should improve the payment system. Earlier, the assembler used to take full payment from the customers at the time of vehicle booking.
This scheme, he added, will be useful in case the car delivery period exceeds over one month. The company is also striving towards minimising delivery period of vehicles.
To minimise the abuse of this facility, in one year, from the date of booking, the customer may make only one application for booking of a vehicle through availing themselves of partial payment scheme, that is, multiple application booking in this scheme is not permitted, and every buyer will have to submit NIC and NTN numbers, he added.
He said that the month of July had remained worst in the IMC’s history in view of all time low orders owing to buyers’ interest towards used cars whose imports were thriving.
In view of sinking sale, the company will produce 1,000 less cars and LCV in July as compared to 4,500 per month. However, he ruled out the possibility of giving any price discount on cars to the buyers when sales were down. “We have closed the production for at least 10 days in the current month,” Parvez said adding delivery period has already been shortened as the dealers have sizable number of unsold stocks.
On introducing new 800cc cars, in replacement of Daihatsu Cuore, the production of which was stopped from May 2012, he told that there had been talks with Daihatsu Company, however, as the costs are very high it is not feasible to bring a new model of a small car at this time.
On Euro II, he said that the government has convened a meeting in Islamabad on Tuesday to discuss the possibility of Euro II compliant diesel and prospects of Euro II diesel version cars. Refineries were under pressure as the Environment Minister was upset as the government had earlier asked the refineries to produce Euro II diesel from July 1, 2012.
However, he said that Euro II compliant diesel will take more than two years as refineries will have to make huge investment.
2) Lucky’s acquisition of ICI at $152.5m: KARACHI, July 30: The much-awaited announcement by Yunus Brothers Group (parent company of Lucky Cement) of acquisition of 75.81 per cent shares in ICI Pakistan Limited came up on Monday.
Lucky and ICI in separate notices disclosed the details of the deal to the stock exchanges.
A binding agreement (share purchase agreement) was signed late evening on Friday (July 27) in Amsterdam, by virtue of which ICI Omicron BV, a 100 per cent owned subsidiary of AkzoNobel N.V. Netherlands, sold its entire holding of 70 million shares in ICI Pakistan to a number of companies in Yunus Brothers Group. Besides, Lucky Cement which would pick up 35.7million shares (half of those on offer) other four group companies Yunus Textile, Lucky Textile, Gadoon Textile and Yunus Brothers Pakistan would take up the remaining 50 per cent.
According to ICI notice, “The price is $152.5 million which represents Rs205.10 per share based upon the mid-exchange rate of Rs94.18 to dollar on July 27” and the company went on to say: “Under the terms of agreement the price will be converted to Rupees at the date upon which the purchasers obtain approval from the Competition Commission of Pakistan (CCP) at spot rate of exchange on such day.”
The Lucky Cement made similar announcement and added: “The bid value of this acquisition is $152.5 million (payable in equivalent Pak Rupees) which will be subject to certain adjustments based on lock box mechanism for cash and indebtedness to be ascertained as per the terms of the agreement.”
Mohammad Abid Ganatra, Group director finance, told Dawn that most of the Yunus Brother group companies involved in the acquisition were deleveraged or thinly leveraged.
He said that Lucky Cement did not participate for synergies, but as part of the Group’s strategy of diversification and entry into businesses that are integral to the economic fabric and opportunities in the country.
He said: “The Group intends to invest in the existing businesses of ICI Pakistan for continued growth whilst evaluating additional opportunities to maintain its leadership position”.
Mr Ganatra stressed that the price of ICI stock quoted on the stock market is not a true reflection of the company value; rather it is the “enterprise value” which should be considered of significance and that is much higher than the price of ICI’s stock price quoted on the market.
He said that ICI Pakistan has a rich successful track record and strong corporate brand equity and strong growth potential.
The Yunus Brothers Group is committed to retain existing experienced management as they are the most critical component for the development of the Company. A Lucky Cement press release added: “The financing of this transaction has been planned in a manner to carry minimal debt on the books of these group entities without compromising on their future growth prospects”.
The Lucky-ICI deal was the subject of heated debate at the stock market on Monday and almost all big brokerage houses brought out their research notes on the subject.
One house noted: “With relatively less-leveraged balance sheet, Lucky is planning to take benefit of gearing the transaction debt side amid borrowing the major part from banks”. The company could finance acquisition with 50 per cent debt and 50 per cent from internal sources or it could finance the acquisition with 100 per cent debt.
The total price of the transaction works out to Rs16.8 billion at per share price of Rs206; the latter happens to be 49 per cent higher than the six-month average market price of the ICI stock. Total acquisition cost for Lucky would clock in at Rs8.4 billion.
Along with the acquisition of 70 million shares, the Group also has to buy further 11 million shares from minority shareholders (as per the substantial acquisition of voting shares and takeovers, Ordinance 2002. The acquirer has to buy at least 50 per cent of the free float of 22 million at Rs206, involving Rs2.3 billion. Thus the total deal would be Rs14.5 billion plus Rs2.3 billion, taking the cost to Rs16.8 billion or $177 million, for the Lucky Consortium.
The biggest worry for the investors on Monday was that due to acquisition, Lucky Cement may not pay dividends despite record earning per share for FY12 expected at Rs20.8.
Some analysts suggested that the company may opt to disburse bonus instead of cash. Investors also thought the company may ask shareholders for cash in right issue. For all those explanations and criticisms, its obvious that the market has its own mind.
Following the announcement of the deal on Monday, the share in ICI hit the “upper lock”, showing gain of Rs7.90 to close at Rs166.06. The share in Lucky Cement lost Rs5.44 and closed at Rs123.85.

MOHAMMED SALEEM MANSOORI


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