TAURUS
SECURITIES LIMITED
A Subsidiary of National Bank of Pakistan
Value Call
Monthly Review and Outlook
26 November 2009
Index
The Market - One Year Performance Volume
Volume
10500
(m)
600
Index
500
8500
400
The Market
The market was volatile again for the second consecutive month
due to the security and political situation. The KSE-100 Index
gained only 47 points or 0.51% during November 2009 to close at
9,206 while the KSE-30 Index improved by 43 points or 0.45% to
9,706. The average daily turnover during November was 126.87m
shares compared to 214.04m shares during October 2009. The
net inflow of foreign funds according to SCRA figures during November 2009 (upto November 25) was US$20.29m while the yearto-date net inflow was US$315.22m.
Lucky Cement Company Ltd. (LUCK)
Lucky Cement, a blue chip company with a growing admiration of
being on top of the trends is expected to post earnings after
tax for FY10 of PKR 3,790m (EPS: PKR 11.72). There is a
decline in profits as compared to last year mainly on the back of
prevailing economic recession, security concerns and political instability in the country further being fuelled by the price war that
was initiated in the first quarter of FY10 and still persists.
Despite these irregularities, Lucky stands tall in its sector, jumping through hoops and living upto the expectations of a true market leader. The diversification of the export market might be the
saving grace for the company going forward.
We have revised our fair value estimates and forecasted earnings
based on the changing domestic and global scenarios. The revised fair value of the scrip comes to PKR 75.20, as compared to our previous fair value of PKR 85.20.
300
6500
200
100
4500
26-Nov-08
02-Apr-09
0
24-Nov-09
27-Jul-09
The Market - November 2009
Index
Volume (m)
Turnover
9500
Index
300
9000
200
8500
100
8000
0
2-Nov
6-Nov
13-Nov
19-Nov
25-Nov
Stock Market Data
30-Oct-09
26-Nov-09
%Chg.
KSE-100 Index
9,159.18
9,206.21
KSE-30 Index
9,662.87
9,706.48
0%
Shares Traded m
4,887.35
2,283.64
-53%
Value Traded
Rsm
238,980
120,296
-50%
US$m
2,879.28
1,449.35
-50%
Rsb
2,655.71
2,658.29
0%
32.0
32.0
0%
Market Cap.
US$b
1%
Performance for the month of November 2009
Top Gainer
26-Nov-09 % Chg. Chg.(Rs.)
Javedan Cement
Lakson Tobacco Co.
Meezan Bank
Attock Refinery
Nakshbandi Industries
Top 5 Losers
Bestway Cement
KASB Bank
Pakistan Reinsurance
Fazal Textile
Jahangir Siddiqui & Co
87.00
284.26
16.56
151.98
11.90
43.6%
35.8%
28.2%
21.9%
19.2%
26.41
74.92
3.64
27.32
1.92
26-Nov-09 % Chg. Chg.(Rs.)
18.50
5.75
26.02
399.00
29.96
-22.9%
-15.8%
-15.4%
-15.1%
-14.6%
-5.49
-1.08
-4.75
-71.00
-5.14
Taurus Securities Limited
Value Call : November 2009
Table of Contents
Market Outlook
03
Company Report:
Lucky Cement Company Limited (LUCK) @ 63.49
06
Ratings Guide
22
KSE-100 Key Indicators
23
KSE-100 Statistics
25
Economic Indicators
27
2
Taurus Securities Limited
Value Call : November 2009
Market Outlook
Market Review - November 2009
The market was volatile again for the second consecutive month due to the security and political
situation. The KSE-100 Index gained only 47 points or 0.51% during November 2009 to close at 9,206
while the KSE-30 Index improved by 43 points or 0.45% to 9,706. The average daily turnover during
November was 126.87m shares compared to 214.04m shares during October 2009. The net inflow of
foreign funds according to SCRA figures during November 2009 (upto November 25) was US$20.29m
while the year-to-date net inflow was US$315.22m.
The first 10 days of the month were quite volatile, as the KSE-100 Index shed 396 points or 4.3% to
touch 8,762 on November 10. The main factor behind the fickleness of the market was the unstable
security situation throughout the country. There were a number of bomb blasts during the first two
weeks, especially in Rawalpindi and Northwest Frontier Province. Other minor factors were the
political situation, in particular, the controversy over the National Reconciliation Ordinance and the
possible fallout for the ruling party and news of gas load shedding during the upcoming winter
months that could negatively affect the manufacturing sectors in Punjab and NWFP.
Fortunately, the Index staged a recovery over the next third of the month that saw the KSE-100 Index
gain 543 points or 6.2% to close at 9,306 on November 20. This upsurge in the market can be
attributed to the improvement in key macroeconomic indicators such as the reduction in both the
trade deficit and current account deficit for the July to October 2009 period and decline in the CPI to
8.87% YoY for October 2009 and average of 10.2% for the 4mFY10 period. The decline in both headline
and core inflation and reduction in the T-bill yields during the November 19 auction led to sanguine
expectations from investors that the central bank would lower the policy rate by 50 to 100 bps in the
forthcoming monetary policy statement on November 24. In addition, both domestic and foreign
institutions had accumulated selective scrips during this second third of the month.
Comparative Performance (November 2009)
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
21.40%
15.15%
Outperformers
0.00%
-0.25%
-1.08%
-1.22%
-1.75%
-2.57%
-3.61%
-3.92%
-5.42%
-6.46%
-6.73%
-8.12%
-8.43%
-8.87%
-8.98%
-12.17%
-13.76%
-15.16%
3
9.64%
9.06%
5.70%
4.92%
3.95%
3.63%
3.24%
2.17%
2.13%
1.38%
0.39%
Underperformers
30%
Attock Refinery Ltd.
B.O.Punjab
Nishat Mills Limited
Engro Chem.
United Bank Ltd.
Fauji Fert Bin
Pak Petroleum Ltd.
Bank Al-Falah
Hub Power Co. Ltd
Oil and Gas Dev
Pak Oilfields
Fauji Fertilizer Co.
MCB Bank Ltd.
KSE-100
Kot Addu Power Co. Ltd
Askari Bank Ltd.
Habib Bank Ltd
Shell Pakistan
P.S.O.
DG Khan Cement
Lucky Cement
Adamjee Insurance
P.T.C.L.A XD
Packages Limited
NIB Bank
EFU General Ins
Arif Habib Limited
AHSL
NBP
Azgard Nine
JSCL
Analyst: Salman Rasheed
Email: salman@taurus.com.pk
Taurus Securities Limited
Value Call : November 2009
The last week of the month saw the market become cautious, dull and lackluster, as reflected in the
thin turnover that dipped below 85m shares a day. The Monetary Policy Statement of a cut of 50 bps
in the policy rate to 12.50% on November 24 came as no surprise to investors and thus, profit taking
was witnessed in the next trading day. Another reason for the slight selling pressure in the final week
was the Eid ul-Adha holidays from November 27 to 30. The KSE-100 Index shaved off 100 points from
November 20 to the final trading day of the month.
Regional Valuation
The Pakistan market PE at 7.35x is trading at a 48% discount to the regional average of 14.21x.
Based on dividend yield, Pakistan is the most attractive at 6.40% as compared to the regional average
of 2.72%, followed by Thailand (5.83%) and Singapore (4.98%).
Regional Valuation Comparison
12m F
12m F
PEx
Dividend Yield (%)
China
19.62
1.00
Hong Kong
15.09
2.24
India
15.35
1.11
Indonesia
13.42
2.00
Malaysia
13.82
3.11
Pakistan
7.35
6.40
Philippines
12.52
3.19
Singapore
14.22
4.98
9.95
1.19
Taiwan
17.27
2.54
Thailand
10.83
5.83
Country
South Korea
Source: Thomson One Analytics
Date: November 19, 2009
Looking ahead
Going into the last month of the calendar year, we expect the activity on the bourses to remain
lackluster because of the Christmas holiday season and Moharram breaks. Profit taking activity by
both local and foreign investors is likely, leading to some downward pressure on share prices. The
fallout from the NRO could still have an adverse impact on the political situation, as well. On the
other hand, if action is taken next month to amend the 17th amendment in the constitution to
empower the Prime Minister and parliament, then this could be a major driver for a year end rally, as
some cloudiness on the domestic political scenario would become clearer.
We recommend investors to accumulate value and dividend stocks on weakness.
4
Taurus Securities Limited
Value Call : November 2009
This Page has been left blank Intentionally
5
Value Call: November 2009
Taurus Securities Limited
Lucky Cement Company Limited
ACCUMULATE
Target Price
75.2
12-month Trading data
Price of Nov. 26' 09 (PKR)
63.49
High (PKR)
88.40
Low (PKR)
25.26
Avg daily volume ('000)
5,529.02
Avg value traded (PKR m)
341.31
Shares outstanding (m)
Free float
323.38
45.0%
Market Capitalisation (PKR m)
20,531
Market Capitalisation (US$m)
247
52-week gain
9.9%
52 week gain (index)
0.2%
Beta
Lucky Cement, a blue chip company with a growing admiration of being
on top of the trends is expected to post earnings after tax for FY10 of PKR
3,790m (EPS: PKR 11.72) against the comparable period's earnings after
tax of PKR 4,597m (EPS: PKR 14.21). This would be a projected 18% YoY
decline in profits mainly on the back of prevailing economic recession,
security concerns and political instability in the country further being
fuelled by the price war that was initiated in the first quarter of FY10 and
still persists. Despite these irregularities, Lucky stands tall in its sector,
jumping through hoops and living upto the expectations of a true market
leader. Diversification of export market might be the saving grace for the
company going forward. Given the changing scenarios in the domestic
and global front, we have revised our fair value to PKR 75.20 from previous fair value of PKR 84.20.
1.23
KATS Code
LUCK
Price Performance (12 months)
90
80
LUCK
Rel. KSE-100
70
Rs
60
50
40
LUCKY CEMENT
Revenues
EBITDA
Operating Profit
PAT
Shareholders' Equity
Total Assets
EPS (PKR)
DPS (PKR)
BVS PKR)
PEx
Price/BVS x
Price/EBITDA x
Dividend Yield
Source: TSL Research
FY08A
16,958
2,937
3,076
2,678
18,655
34,239
8.28
0
57.69
7.67
1.10
6.99
0%
FY09A
26,330
7,032
7,217
4,597
23,252
38,337
14.21
4.00
71.90
4.47
0.88
2.92
0%
FY10F
21,770
7,231
6,847
3,790
27,042
43,993
11.72
2.50
83.62
5.42
0.76
2.84
4%
FY11F
23,465
7,683
7,431
4,100
30,333
44,366
12.68
3.00
93.80
5.01
0.68
2.67
5%
FY12F FY13F
25,131 27,916
7,927
8,376
7,799
8,403
4,184
4,355
33,547 36,608
45,510 48,139
12.94
13.47
4.00
5.00
103.74 113.21
4.91
4.71
0.61
0.56
2.59
2.45
6%
8%
30
20
Key Investment Considerations
10
?With the successful expansion of Line "G" of the Karachi Plant by 1.25m tons, the total
capacity has increased by 19% to 7.75m tons per annum, Lucky's position in the market
has been strengthened by enabling it to enhance its economies of scale.
0
28-Nov-08
02-Jun-09
24-Nov-09
?Increased capacity of the south plant has enabled the company to penetrate the export
market further by increasing its exports through sea route.
?The Company holds the advantage of lower transportation cost due to its presence in
strategic locations both in the south and north regions.
?Overall economic slowdown and current fiscal crises likely to result in slashing of
PSDP expenditure leading to a decline in local sales. Thus, we are expecting the local
volumetric sales for FY10 to fall by 7%.
?Declining coal prices in the international markets and conversion of Pezu plant from
furnace oil to gas has improved the gross margins of the company.
?Rupee devaluation has diluted the lower coal price benefits for the cement manufac-
6
Analyst: Saad Najaf Ali Sayed
Email: Saad@taurus.com.pk
Value Call: November 2009
Taurus Securities Limited
turers, but on the other hand, it has made exports much more lucrative. Lucky, with exports
reaching 30.2% of the total sales will likely benefit the most from exports.
?Decreasing domestic demand has compelled cement manufacturers to break the quotas and price
arrangement formulated between them, which has triggered a cut throat competition in the market
and a price war has ignited in the industry. In such circumstances, Lucky has an edge due to lower
cost per ton as compared to its peers in the industry.
?It plans to set up a plant in Africa to mitigate the risk of a slowdown in exports in the Middle East
thus, discovering newer export markets.
Valuation & Recommendation
With a WACC of 17.9% and Terminal Growth of 4%, our DCF based fair value for the scrip comes to
PKR 75.20 per share. At the price of PKR 63.49 per share on November 26, 2009, we recommend
Accumulate for the scrip.
As the valuation is susceptible to changes in capital structure, a sensitivity analysis has been constructed between WACC and growth rate to demonstrate varying target prices that could be established as a result of changes in either of these factors.
Discounted Cash Flow Value Per Share
Growth %
16
2
80.70
3
85.80
4
91.80
5
98.80
6
107.20
Source: TSL Research
17
73.30
77.50
82.50
88.20
95.00
WACC %
17.9
67.30
71.00
75.20
80.00
85.70
19
61.00
64.10
67.60
71.60
76.20
20
55.90
58.50
61.50
64.90
68.70
Lucky Cement Limited - DCF Valuation
Cost of Debt
Pre-Tax Cost of Debt
15.00%
Tax Rate
35.0%
After Tax Cost of Debt
Cost of Equity
9.75%
Risk free Rate of Return
12.0%
Equity Risk Premium
7.0%
Company Beta
Cost of Equity
1.23
20.6%
Weight of Equity
75.0%
Weight of Debt
25.0%
Weighted Average cost of Capital
Growth
17.91%
4.0%
Net Present Value of Future Cash Flow (PKRm)
33,753
Net Debt Value (PKRm)
9,439
Net Firm Value (PKRm)
24,314
Shares Outstanding (million share)
Value per Share (PKR)
323.38
75.20
Source: TSL estimates
7
Value Call: November 2009
Taurus Securities Limited
Lucky Cement-Company Profile
History
Lucky Cement Limited finds its origin from Abdul Razzak Tabba who founded the company in
September 18, 1993. The company initiated its operations from Pezu; district Lakki Marwat in North
West Frontier Province (NWFC). Younus Brothers Group (YB Group- based in Karachi) is the sponsors of Lucky, which is one of the largest business groups of today. Some of the diversified investments by YB group are in Textile, Spinning, Weaving, Processing, Finishing, Stitching and power
generation. Some of the major establishments of the group are:
1. Lucky Textile Mills
2. Fazal Textile Mills Limited
3. Gadoon Textile Mills Limited
4. Lucky Energy (Private) Limited
5. Yunus Textile Mills
Distinctive Features
Today, Lucky Cement stands tall as the largest cement producer in Pakistan. Its distinctive features
are:
?Largest Portland Cement Producer in Pakistan
?Present capacity 7.75 mtpa
?Dry process technology runs on 100% coal firing system
?ISO - 9001:2000 certified
?Only company with its own Silo
Bourses
Being the largest cement manufacturer in Pakistan, the company is registered in all three stock
exchanges of Pakistan. Lucky has also issued GDRs (Global Depository Receipts), which are listed
and traded on the Professional Securities Market, of the London Stock Exchange. It's part of the KSE100 Index, its symbol code being "LUCK". The highest share price the company witnessed, since its
creation, was PKR 147.00 (per share). This price was achieved on the 18th of April 2008.
8
Value Call: November 2009
Taurus Securities Limited
Brand
Lucky Cement markets its cement under the following brands:
?Lucky Cement
?Lucky Star
?Lucky Gold
?Chairman
?Lucky Sulphate Resistant Cement (SRC)
PESTEL Analysis
PESTEL analysis is a strategic planning and management technique that provides a useful framework for environmental scanning and macro-economic factors for strategic management.
Political
The ongoing scenario of Pakistani Politics is no different than what it has been in the past with
security crisis spreading trepidation for the common man. With growing concerns for security and
political stability, the Cement sector like any other sector has confronted the businessman community with a number of challenges such as the issue of maintaining the local demand in such times of
upheaval.
Apropos of the above, Lucky would be keeping its fingers crossed with reference to the government
policy relating to the Public Sector Development Program (PSDP). An allocation of PKR 646bn was
made for the PSDP for FY10 but so far, no funds have been released in lieu of PSDP spending.
Furthermore, there is a projected cut of PKR 75-150bn in PSDP expected, which would directly
hamper the local sales. The correlation between PSDP and Cement demand is more extensively
covered later in the report.
Economic
Last year, the entire global economic front was under turmoil with global recession spreading
frenziedly and inflation rates reaching new heights. Though, things have started settling down with
improved economic global projections, for Pakistan, GDP growth is projected at 2.5-3.5% for FY10 by
the State Bank against the corresponding period's GDP growth of 2%. Whereas, the expected inflation (Source: Annual Report for 2008-2009 State Bank of Pakistan) for FY10 is 10-12% against FY09's
much dreaded figure of 20.8%.
KIBOR (Karachi Inter Bank Offer Rate) has also registered a fall of 12% YoY in the 1QFY10 where the
interest rate stood at 12.41% against the comparable quarter last year's interest rate of 14.10%. The
lowering of interest rate has played a pivotal role for the cement sector as many of the companies are
highly geared, leading to lowering of their financial charges. Lucky, on the other hand would remain
indifferent in this regard as compared to the rest of the sector, as its less debt leveraged.
9
Value Call: November 2009
Taurus Securities Limited
Political
-Govt Stability
-Security crisis
-Changing govt
policies
Economic
-PSDP cut
-Slowdown in GDP
growth
-Changing Interest
Rates
Social
-Human Resource
Excellence
Lucky Cement
Company
Technological
-Waste Heat
Recovery Plant
Project
-Line “G” addition
-Automatic loading
of loose cement
-Gas fired systems
Environmental
-Waste Heat
Recovery Plant
Project
-Environmental
Management
-CSR
Legal
-Fighting CCP’s
decision
10
Value Call: November 2009
Taurus Securities Limited
Social
The demography of Pakistan is such that the majority of the population is concentrated in rural
areas where most of the infrastructure developments should take place. As such, there is a continuous demand for cement given the other factors remaining constant.
Lucky Cement is a market leader and in this regard does not lag behind in any way; having a local
market share of 13% and an export market share of 30%. It has a number of quality brands under its
belt that are sold at a premium.
Technological
In terms of technology, Lucky is a leader all the way. It has successfully expanded its installed capacity
by 1.25mtpa (Line "G" at Karachi Plant) to a total capacity of 7.75mtpa, which is the largest in
Pakistan for this sector.
It has also converted the Pezu Plant Captive power generation units to gas fired systems, the only one
of its kind in Pakistan for the likes of such huge capacity generators. Some of such generators are the
latest models of Rolls Royce.
To facilitate the export sales even more, Lucky has inaugurated Pakistan's first ever cement export
terminal.
Environmental
When it comes to playing the role of a good corporate responsible citizen, Lucky stands up-right and
up-front with the highest credibility in the sector by being eminent in the Environment Management.
It has also regularized its internal environmental impact assessment and environmental audits.
In terms of Corporate Social Responsibility (CSR), Lucky has several scholarship programs for the
needy and brilliant students at places like IBA, IoBM, GIK and Jinnah Foundation School. Some of its
projects in this accord are the "The Hub School" & "Karachi School for Business and Leadership"
(KSBL).
Besides the above programs, Lucky is an active member of WWF- Pakistan, donates generously in
hospitals like "Women & Children Hospital" situated in Ghazni Khel, NWFP. It has also established a
Dispensary in Pezu, NWFP for its employees and the local residents. It also bigheartedly contributed
towards the IDPs (Internally Displaced Persons).
Lucky also pioneers in the role of atmospheric pollution control, whereby steps are taken to control
dust and gaseous emissions from its plants. With the help of environmentally friendly bag-houses,
these plants have a pollutant substance system for trapping and suppression to control dust and
other substance emissions, which result in giving an even better outcome of 35 mg/ Nm3 than the
World Bank Standards of 50mg/Nm3.
Apart from this, Lucky has joined hands with the government for a greener Pakistan through
implanting 15,000 trees by 2015. Notably, the company is also the member of World Economic
Forum, Pakistan Business Council (PBC) and Pakistan Institute of Corporate Governance (PICG).
Coming towards the most significant aspect is the Waste Heat Recovery Plant Project, which is
expected to be completed by the end of the 2009. Energy is said to form 60-70% of the direct cost of
production for cement in many world regions. Therefore, the waste heat generated from the cement's
11
Value Call: November 2009
Taurus Securities Limited
production process can be efficiently utilized to generate electrical energy amid no added fuel
consumption, resulting in the reduction of greenhouse gases.
Legal
The company has some cases against it in the court of Law, which it is defending against and is
expecting to end with fruitful results. One of such cases is pertaining to the show cause notice
being issued to Lucky amongst other cement manufacturers by the Competition Commission of
Pakistan (CCP) on their Suo Moto action to increase cement prices across the country on March
20, 2008. In response, the company has filed a writ petition in the Honorable Islamabad High
Court-challenging the Competition Commission 2007. Apropos of it, a "Stay Order" had been
granted by the court, which subsequently was vacated by the court by dismissing the writ
petition. The management of Lucky intends to contest if any adverse action is taken against it.
A penalty by CCP has recently been imposed on Lucky of PKR 1.27bn for practising cartel and
artificially pushing up prices. If the company ends up paying the fine there would be a PKR 3.9
per share reduction in the earnings for FY10.
SWOT Analysis
A scan of the internal and external environment is an important part of the strategic planning
process. A SWOT analysis helps in matching the firm's resources and capabilities with its
competitive environment in which it operates. Also, it acts as a good framework for reviewing
strategy, position and direction of a company or business proposition.
SWOT analysis of Lucky Cement reveals that the company is on course of an "Aggressive Strategy" by being the pioneer in the sector in exploring new opportunities. With respect to the Boston
Consultant Growth model, Lucky is a rising star with all the right reasons to be called a "Cash
Cow". Over the years, the company has shown its willingness and ability to adopt a foresighted
view through conversion of opportunities into strengths.
12
Value Call: November 2009
Taurus Securities Limited
13
Value Call: November 2009
Taurus Securities Limited
Cement Sector Outlook
Cement sector is one of the vital industries of Pakistan. In FY09 alone, the industry has earned
foreign exchange of $750m with PKR 30bn being contributed to the national exchequer. In
order to shape up or ship out, an injection of $6bn has been made over a period of time to expand
the sector's production capacity from 16.72m tones to 41.76m tones from FY02 to FY09.
PSDP- Dot your I's & cross your T's
Growth of cement industry is rightly considered the barometer of economic activity. The PSDP,
therefore, acts as the major demand driver for the industry showing a strong positive correlation of 0.99, which is also illustrated on the next page in the graph.
The allocation of Public Sector Development Program (PSDP) has generated a lot of buzz for
FY10 as the Government has allocated a hefty budget of PKR 646bn which is like comparing
apples to oranges when being compared to the actual disbursement of funds, which was around
PKR 346bn in FY09. This is mainly on the back of 8 small dams to be built in all the four
provinces, which bodes well for the country's long term cement demand.
Despite the enormous budget for FY10, there may be an anticipated cut in the PSDP of PKR 75150bn on account of various factors such as, IMF's pressure to keep the fiscal deficit under
control. These pressures relate to high inflation levels, which although seems to have lowered
but in actuality have risen on a MoM basis. It is only the base effect compared to last year, which
triggered the fall in inflation, the people thus being misled that the inflation rates are drastically
falling. Following table depicts changes in cement demand with respect to cut in PSDP.
Sensitivity of PSDP on Cement Sales for 2010
PSDP Size
Cement Sales
Y-o-Y Chg. Local Capacity
PKR bn
Million tons
%
Utilization %
646
29.35
53%
67%
546
24.81
29%
56%
446
20.26
5%
46%
346
15.72
-18%
36%
246
11.18
-42%
25%
Source: TSL Research
14
Value Call: November 2009
Taurus Securities Limited
Correlation between PSDP Allocation and Cement Consumption
900
Local Cement Sales (RHS)
30
PKR in billion
700
21.0
600
20
14.8
9.9
9.8
11.0
12.5
435.0
300
15
458.0
346.0
313.7
200
227.7
100
-
25
19.3
16.9
500
400
22.4
89.8 126.3
FY01
FY02
129.2
FY03
10
Tons in million
PSDP (LHS)
800
5
161.0
FY04
FY05
FY06
FY07
FY08
FY09
Source:TSL Research
Demand Dynamics
Threat to Survival
The fiscal year 2010 kicked off in a state of turmoil on the back of a price war. Finally, the price
consensus was breached between the cement manufacturers and now they stand scattered and
divided, inevitably struggling for their survival.
The prices have dropped from as high as PKR 375 per 50kg bag to PKR 230-240 per 50kg bag, which
is almost a 39% decline doing no good to the infant companies in the sector. Lucky being a key player
in its sector and being crowned as the market leader has the ability to sustain the brunt being borne
by the majority of the companies in the sector. However, we maintain our stance that volume driven
earnings cannot compensate for price driven earnings.
The sector is going through a rough patch at this time, some even designating it as the worst ever
crisis of the sector. If prices remain persistently low and to further agravate the matters, if there is a
sharp cut in PSDP, then the entire survival of the sector seems gloomy.
Going forward, we believe that pricing consensus will be formed as manufacturers are still marred by
high borrowing, fixed and variable costs. However, timing of price recovery cannot be ascertained. In
the past, price wars have lasted from a few days to approximately 9 months. It is pertinent to note
that, cement manufacturers are highly leveraged and will face problems with debt repayment in a low
price regime, adding the risk of bridging the liquidity gap with short term financing. Therefore, we
expect the industry to form a price consensus by 1HFY10. For FY10 we have assumed ex-factory prices
at PKR 5000/MT (PKR 250/bag).
Exports to the rescue
Exports from Pakistan have witnessed a spectacular growth in FY09 as they grew by 47% with a sales
volume of 11.38m tones against the comparative period's volume of 7.72m tonnes per anum. With
the expansion of global production capacities coming into play, it's a crunch time for the Pakistani
sector to explore new markets like Lucky boded well with the drumming up of new markets in the
African region. Countries like India, Iran and Saudi Arabia have and are in the process of expanding
their capacities.
15
Value Call: November 2009
Taurus Securities Limited
One of the major threats for our exports would be Saudi Arabia(KSA). With the removal of its
export ban, now it can export surplus cement which would render it cheaper freight due to the
proximity (mostly inland route-giving further edge of improved delievery time) and thus, cost
advantage. Back-of-the-envelope calculations showed that the production cost for KSA's cement
averaged US$ 28 per ton against Pakistan's average cost of US$ 36 per ton in FY09. Furthermore,
apart from optimum location advantage, KSA is also one of the lowest cost producers in the
region partly because production cost is govt-subsidized in terms of energy and fuel. This
further poses a threat to cement companies based in the North region as they are incurring US$
12-15 per ton as in-land freight to bring the cement to the port for exports. In case of a global
price competition, it would greatly deter their exports and consequently be fatal for some companies to bear such a brunt.
The map above shows the proximity of Karachi port compared to Saudi Arabia, clearly depicting
that KSA has proximity advantage other than the subsidy benefit.
Lucky stands tall!
It is said, nothing ventured, nothing gained and Lucky has complied to this strategy and lived
upto its expectations as a market leader. The company spotted the need to explore new markets
while already being in the maturity phase in exports to the Middle-East. Considering the dire
need of cornering the market of exports, it plans to setup a plant in Africa to mitigate the risk of
a slowdown in exports in the Middle-East. This decision of the company, again, bodes well with
its reputation of a premium market brand.
16
Value Call: November 2009
Taurus Securities Limited
Local and Export Dispatches over a period
6,000,000
5,000,000
Tons
4,000,000
3,000,000
2,000,000
1,000,000
FY05
FY06
Local Sales
FY07
FY08
Export Sales
FY09
Total
Source: TSL Research
LCL- Market Share (%) FY09
12.73%
30.18%
Local Sales
Export Sales
Source: TSL Research
Lucky, over the years has concentrated on expanding its exports rather than its local dispatches due
to the huge margins of profit available along with the added benefit of reduced effective tax rate. The
graphs above show the market share of Lucky in FY09 and the bifercation of its dispatches over the
years.
Earnings Outlook
Lucky is projected to produce an earnings after tax for FY10 of PKR 3,790m (EPS: PKR 11.72) against
the comparable period's earnings after tax of PKR 4,597m (EPS: PKR 14.21). It may give out dividends of PKR 2.50-2.75 per share for the period ending June 2010. The projected PAT for FY13 is PKR
4,355m (EPS: PKR 13.47).
Both the top line and the bottom line are projected to grow with a Compound Annual Growth Rate
(CAGR) of 9%. The CAGR has been determined on the basis of estimated future projections from the
period of FY10 to FY14.
17
Value Call: November 2009
Taurus Securities Limited
Exports for the period of FY10 are expected to hover around the same level of last year FY09 or
rise by 5% as compared to FY09, which were 3.4m tones. With the cornering of markets in the
African region the exports are expected to rise in the upcoming years.
The company has boded well with Finance costs, giving itself an edge in times of crisis whereby,
the overall profitability of the sector is less and the company is able to translate the modest gross
margins to the bottom line, unlike other companies whose profits are crunched due to finance
costs. Lucky is left with two non-current loans to be repaid by the end of FY2013.
The sector reaped the benefits of falling coal prices since its prices rose to new heights in 2008.
The coal prices have stabilized and are expected to rise by a meager 5-10% per annum. A
sensitivity of coal prices has also been prepared in the report lower down the order, giving out
different scenarios.
Lucky Cement Limited
Key Ratios
FY08A
FY09A
FY10E
FY11F
FY12F
FY13F
Gross Profit Margin
26%
37%
37%
37%
36%
35%
Operating Profit Margin
18%
27%
31%
32%
31%
30%
Net Profit Margin
16%
17%
17%
17%
17%
16%
Asset Turnover
0.64
0.90
0.65
0.66
0.67
0.70
ROCE
10%
16%
11%
12%
11%
11%
ROE
ROA
19%
9%
22%
13%
15%
9%
14%
9%
13%
9%
12%
9%
Debt- to- Equity
0.84
0.65
0.63
0.46
0.36
0.31
Interest Cover
19.20
5.19
4.35
6.28
6.87
9.27
Equity Ratio
0.54
0.61
0.61
0.68
0.74
0.76
Debt Ratio
1.00
1.00
1.00
1.00
1.00
1.00
Operating Cashflow Ratio
0.16
0.72
0.25
0.54
0.62
0.91
Source: TSL Research
The company is projected to remain in the green zone for the years to come based on its highly
capable management, which has an innate quality of dealing with emergent strategies based on
continous changing events. Despite a declining trend in profits, which is inevitable to the sector
given the current political unrest and economic instability as well as an expected cut in PSDP, the
company with its continous ability to hunt for new markets for exports and due to economies of
scales has the ability to survive in the long-run. This current price war may very well pull the
plugs for small cement players in the sector, leaving behind even a greater opportunity for the
company to capture and extend the local share in the market.
18
Value Call: November 2009
Taurus Securities Limited
Profitability Ratios
40%
35%
30%
25%
20%
15%
10%
5%
0%
FY08A
FY09A
Gross Margin
FY10E
FY11F
Operating Margin
FY12F
FY13F
Net Profit Margin
Source: TSL Research
Risk to our projections:
?Price volatility As we have witnessed during 1QFY10, the sharp decline in cement prices on
the back of shrewd domestic competition among producers could dampen the profitability of the
company.
?Political chaos: Our valuations ignore the current political upheaval that may trigger a
new security crisis in the country, providing for the instability of the government as well as its
policies. To further add fuel to the fire, this would curtail the businessman’s confidence to a bear
minimum.
?Supply Glut: With the global expansion of cement production capacities, especially by the
GCC including Saudi Arabia, there may exist a supply glut at both fronts, internationally as well
as locally.
?Volatile Capital Structure: Our valuation is highly susceptible to changing capital structure of the company as most of the expansions during the last 2-3 years have been debt financed
and it is expected to retire these debts completely by the next 3 years.
?Slowdown in Economy: Our valuations are restricted and dependent upon factors such as
the extent to which the government releases funds under the PSDP program. Other factors
would include the GDP target, Interest rates, inflation and exchange rates etc.
?Price hike in Electricity tariffs & Coal prices: Our assumptions are based on general
price rises but if electricity tariffs or coal prices jump exponentially then our assumptions would
not hold true.
19
Value Call: November 2009
Taurus Securities Limited
Sensitivity Analysis
Earnings are highly susceptible to ex-factory prices and given the current uncertain scenario
with respect to price arrangements among cement manufacturers, a sensitivity analysis for exfactory prices (ceteris paribus) becomes imperative.
Sensitivity Analysis of Ex-Factory Prices
FY10F
250
Base Case Prices
Scenario1: Increment by PKR20
Scenario2: Increment by PKR10
Scenario3: Base Case
Scenario4: Reduction by PKR10
Scenario5: Reduction by PKR20
Source: TSL Estimates
13.39
12.55
11.72
10.89
10.05
FY11F
270
EPS PKR
14.10
13.39
12.68
11.96
11.25
FY12F Fair Value
275
75.20
14.22
13.58
12.94
12.30
11.65
82.80
79.00
75.20
71.40
67.60
Global economic activity is expected to improve in the near future but the timing of full recovery
cannot be ascertained. Therefore, a sensitivity analysis with respect to coal prices (ceteris paribus) becomes imperative, as prices are determined by international demand dynamics...
Sensitivity Analysis of International Coal Prices (USD per ton)
FY10F
FY11F
FY12F Fair Value
Base Case Prices
90
95
100
75.20
EPS PKR
Scenario1: Increment by 10%
10.35
11.20
11.35
65.70
Scenario2: Increment by 5%
11.04
11.94
12.15
70.40
Scenario3: Base Case
11.72
12.68
12.94
75.20
Scenario4: Reduction by 5%
12.40
13.41
13.73
80.00
Scenario5: Reduction by 10%
13.09
14.15
14.52
84.70
Source: TSL Estimates
20
Value Call: November 2009
Taurus Securities Limited
Lucky Cement Limited
Income Statement
Net Sales
Cost of Sales
Gross Profit
Operating expenses
Operating Profit
Other charges
EBIT
Depreciation and amortization
EBITDA
Financial charges
Profit before tax
PAT
EPS (Rs)
DPS-Cash (Rs)
Balance Sheet
SHARE CAPITAL AND RESERVES
Paid-up share capital
Shares Premium
Accumulated Profit/(Loss)
General reserve
Shareholders' equity
NON CURRENT LIABILITIES
Deferred Taxation
Long term Loans
Long term Deposits
Deferred Liabilities
Total Non Current Liabilities
CURRENT LIABILITIES
Short term finances
Creditors, accrued and other liabilities
Current Liabilities
TOTAL LIABILITIES
Total Liabilities and Equity
Operating Fixed Assets
CURRENT ASSETS
Stores, spares and loose tools
Stocks
Trade debts
Advances & Other Rreceivables
Current Assets
Total Assets
FY08A FY09A
FY10E FY11F FY12F FY13F
16,958 26,330 21,770 23,465 25,131 27,916
12,595 16,519 13,784 14,875 16,149 18,250
4,363
9,811
7,986
8,590
8,981
9,667
1,286
2,594
1,139
1,159
1,182
1,263
3,076
7,217
6,847
7,431
7,799
8,403
644
827
697
751
804
893
2,433
6,414
6,150
6,680
6,995
7,510
504
618
1,081
1,003
932
866
2,937
7,032
7,231
7,683
7,927
8,376
127
1,237
1,413
1,064
1,018
810
2,307
5,177
4,737
5,616
5,977
6,700
2,678
4,597
3,790
4,100
4,184
4,355
8.28
14.21
11.72
12.68
12.94
13.47
0.00
0.00
2.50
3.00
4.00
5.00
FY08A FY09A
FY10E
FY11F
FY12F
FY13F
3,234
7,343
3,078
5,000
18,655
3,234
7,343
7,675
5,000
23,252
3,234
7,343
11,464
5,000
27,042
3,234
7,343
14,756
5,000
30,333
3,234
3,234
7,343
7,343
17,969 21,031
5,000
5,000
33,547 36,608
1,059
6,633
30
174
7,897
1,478
4,300
29
235
6,042
712
5,359
29
235
6,335
299
4,645
29
235
5,207
3,607
3,550
7,687
15,584
34,239
21,050
6,188
2,677
9,099
15,140
38,392
28,334
6,047
2,982
10,617
16,952
43,993
29,009
4,898
3,214
8,827
14,033
44,366
27,610
3,748
2,886
3,443
4,207
7,863
8,303
11,964 11,531
45,510 48,139
26,291 25,023
4,160
709
720
2,548
8,407
34,239
3,412
1,197
1,267
933
7,858
38,337
5,443
755
925
1,789
14,982
43,993
5,866
815
997
1,929
16,755
44,366
6,283
6,979
885
1,000
1,067
1,186
2,066
2,295
19,217 23,114
45,510 48,139
37
3,800
29
235
4,101
375
2,590
29
235
3,228
Cash Flow Statement
FY08A FY09A
FY10E FY11F FY12F FY13F
Cash from operations
1,221
6,572
2,665
4,723
4,874
7,570
Cash from investing activities
(6,484) (5,799)
(150)
(100)
(100)
(100)
Cash from financing activities
2,841
1,577
2,344
(3,545) (3,006) (2,828)
Net change in cash
(2,422) 2,350
4,859
1,078
1,768
4,642
Short term finances
3,607
6,188
6,047
4,898
3,748
2,886
Cash at end of the year
2,168
7,099 11,817 11,746 12,365 16,145
Source:Company Reports & TSL Estimates
21
Taurus Securities Limited
Value Call: November 2009
RATINGS GUIDE
November 26, 2009
Stock
Target
Price Curr.
(LT)
Price
Rating
(LT)
Allied Bank
47.7 63.84 Sell
Bank Alfalah
13.9 14.09 Reduce
HabibBank
MCB Bank
75.3
156.8
NationalBank
United Bank
Attock Cement
98.8 72.69 Buy
67.3 61.7 Hold
68.9 51.12 Buy
Cherat Cement
D.G.Khan
Cement
10.2
Fauji Cement
Lafarge
Pakistan Cem
LuckyCement
M.LeafCement
National
Refinery
Pakistan
Refinery
HubPower
123.1Sell
215.1Sell
12.41Sell
28.2 28.14 Hold
EPS(Rs)
DPS(Rs)
P/E
BVPS(Rs)
FY08A FY09F/A FY10F FY08A FY09F/A FY10F FY08A FY09F/A FY10F
x
Div
Yld P/BV Beta Sh.Out
Year
(%)
end
x
(m)
6.4
7.1
8.8
2.5
2.5
3.1
34.6
57.8
64.6
9 4%
1.1
1.05
646
Dec
1
1.6
2.4
NIL
NIL
NIL
10.8
15.7
18.6
8.8 NIL
0.9
1.2
1,349
Dec
11
22.3
12.4
26
14.9
28.4
5.5
11.5
5
9.5
5
10
71.4
84.6
79.4
106
89.3
124
10 4%
8.3 4%
1.6
2
11
.6
1.27
911 Dec
691 Dec
17.2
7.5
6
18.9
10.1
20.7
20
11.3
16.2
6.5
2.5
1.5
6
2.5
3.2
6.5
2.8
4
114.2
39.4
48.9
116.2
50.5
66.2
118.1
59.5
74.6
3.8 8%
6.1 4%
3.2 8%
0.6
1.2
0.7
1.23
1.05
0.85
897
11
,13
72
Dec
Dec
Jun
0.1
1.7
4.3
NIL
NIL
1
22.6
23.7
27.5
2.9 8%
0.5
0.71
96
Jun
-0.2
1.3
5.2
NIL
NIL
NIL
98.9
59.2
63.2
21.6 NIL
0.5
1.25
304
Jun
0.6
1.5
-0.2
NIL
NIL
NIL
13.4
14
14.3 N/A NIL
0.4
1.23
693
Jun
8.6 N/A NIL
4.6
6.13 Sell
2.9
2.12 Buy
-1.1
-0.1
0.2
NIL
NIL
NIL
9.7
8.3
0.3
1.05
1,135 Dec
75.2 63.49 Accumulate
8.3
14.2
11.7
NIL
4
2.5
57.7
71.9
83.6
5.4 4%
0.8
1.23
323
Jun
18.8 N/A NIL
0.2
1.05
372
Jun
80
Jun
4.8
3.82 Buy
-1.8
-2.1
-0.1
NIL
NIL
NIL
22.5
18.9
223.3
185.1Buy
75.1
19.2
19.2
20
12.5
6
211.6
217
237.7
9.6 3%
0.8
0.92
168.6 104.5 StrongBuy
60.3
-130.6
2.1
1.4
NIL
NIL
194.5
62.3
225.8 50.2 NIL
0.5
0.88
35
Jun
34.7 30.12 Accumulate
2.3
3.3
3.7
2.2
3.4
3.4
24.6
25.5
24.1
8.1 11%
1.2
0.74
1,157
Jun
KAPCO
Attock
Petroleum
P.S.O
46 46.19 Reduce
9.1
6.4
5.5
5.5
6.5
6
24.2
26.2
23
8.5 13%
2
0.43
880
Jun
330 334.6 Reduce
312.3 298.4 Hold
45.9
81.9
53.5
-39.1
54.3
36.3
16.7
23.5
25
5
20
28.3
96.1
180.5
123
121.7
165.2
205.8
6.2 6%
8.2 9%
2
1.4
0.92
1.05
58
172
Jun
Jun
ShellPakistan
272.3
247 Accumulate
75
14.6
25.4
40
13
23
91.3
90
87.4
16.9 5%
2.7
0.61
68
Jun
Sui North Gas
54.7
25.5 StrongBuy
4.6
1.7
5.9
NIL
NIL
3
31.2
29.4
37.2
4.3 12%
0.7
1.08
549
Jun
SuiSouthGas
14.4 13.36 Hold
1.5
2.5
3.2
NIL
2.2
2.9
15.4
16.9
17.9
5.4 16%
0.8
0.97
671
Jun
120.2 106.4 Accumulate
11.5
12.9
13.4
9.5
8.3
11
25.4
29.3
41.8
8 10%
2.5
11
.7
4,301
Jun
217.7 221.6 Reduce
36.4
23.8
29.9
13.3
1.8
13
107.2
109.6
137.9
7.4 6%
1.6
1.03
237
Jun
216.8 182.4 Accumulate
19.8
27.8
22.2
11.7
10.8
11
43.8
63.3
69.2
8.2 6%
2.6
1.1
996
Jun
Oil & Gas Dev.
Pakistan
Oilfields
Pakistan
Petroleum
Honda Atlas
Cars
14 20.77 Sell
0.5
-2.8
0.6
NIL
NIL
NIL
22.6
20
20.6 N/A NIL
Indus Motors
121.7 217.8 Sell
29.2
17.6
11.5
10.5
10
4
120.1
131
134.6
Pak Suzuki
91.2 93.17 Reduce
7.6
4.5
6
NIL
NIL
1
172
175
P.I.C.T.
74.6 109.5 Sell
4.9
8.6
7
2.5
NIL
2
21.4
27.2
39.2
P.T.C.L.
27.8 17.73 StrongBuy
-0.6
1.8
3.7
NIL
0.2
2.5
19.2
19.5
EngroChemical
213
14.2
22.1
21.2
5.9
7
7.5
77.5
80.6
26 Sell
3.1
2.8
2.9
0.6
2.5
2.6
11.2
107 Reduce
9.6
13
11
10
11.5
12.5
18.1
Fauji Fert. Bin
18.3
FaujiFertilizer
104.2
181.5 Accumulate
EngroPolymer
22.8
ICI Pakistan
157.3 163.7 Reduce
19.15 Accumulate
Tri-Pack Films
164.5
108 StrongBuy
1
0.75
143 Mar
18.9 2%
1.6
0.57
79
Jun
180 20.7 NIL
0.5
0.71
82
Dec
15.7 2%
2.8
0.89
109
Jun
28.3
4.8 14%
0.6
1.1
5,100
Jun
84
8.2 4%
2.3
0.83
298
Dec
11.5
11.5
9.3 10%
2.3
1.1
934
Dec
20.4
21.4
8.2 11%
5.2
0.73
679
Dec
14.7 50.4 NIL
Dec
0.7
0.4
1.6
NIL
NIL
0.5
12.6
12.9
1.5
1.04
520
14.9
17.7
22
6.5
6.5
6.8
91.4
112.4
122.9
9.3 4%
1.5
0.9
139 Dec
16
13.9
16
14
11
12
43.7
46.6
50.7
7.8 10%
2.3
0.81
30
22
Dec
Taurus Securities Limited
Value Call: November 2009
KSE 100 - KEY INDICATORS
Sector
Company
Mutual Funds
Modaraba
Leasing Cos.
Inv Co. / Banks
Mkt. Cap
(mln)
PICIC Growth Fund**
3,969.0
First Habib Modaraba**
766.1
Sigma leasing Corp. Ltd.** 2,580.0
Arif Habib Securities**
17,718.8
JS Global**
3,762.5
Sec. P/E: 18.24
Jahangir Siddiqui & Co** 22,868.0
Commercial Bank Allied Bank Limited
45,390.3
Askari Bank Limited
13,373.7
Bank Al-Habib
19,133.9
Bank Al-Falah
19,009.6
Bank Of Punjab
9,254.0
Faysal Bank
9,934.3
Meezan Bank
11,012.5
Habib Bank
112,092.2
Habib Metropolitan Bank
23,041.8
JS Bank Limited
3,094.4
KASB Bank
2,308.6
NIB Bank
19,652.5
MCB Bank Ltd.
148,670.4
National Bank
78,241.3
Royal Bank
32,315.2
Silk Bank
4,069.4
Soneri Bank
5,601.6
Standard Chartered Bank 34,844.3
Sec. P/E: 8.42
United Bank Limited
68,665.4
Insurance
Adamjee Insurance
13,405.1
E.F.U. General Insurance 10,862.9
E.F.U. Life Assurance
9,548.3
IGI Insurance
6,165.9
New Jubilee Insurance
3,527.8
Sec. P/E: 12.73
Pakistan Reinsurance
7,806.0
Textile Spinning Fazal Textile**
2,468.8
Textile Weaving Nakshbandi Industries**
1,399.3
Textile Composite Azgard Nine Limited
9,391.4
Sec. P/E: 11.79
Nishat Mills**
16,127.5
Woollen
Bannu Woollen
99.2
Syn. & Rayon
Ibrahim Fibers
10,929.8
Jute
Thal Limited**
2,269.8
Sugar
Haib Sugar Mills Ltd.
3,030.7
0 Bestway Cement
6,026.3
D.G. Khan Cement**
8,561.6
Fauji Cement**
4,249.9
Javedan Cement**
2,528.6
Lafarge Cement
2,782.8
Sec. P/E: 5.62
Lucky Cement**
20,531.1
Tobacco
Lakson Tobacco Comp.
17,504.8
Sec. P/E: 12.12
Pakistan Tobacco
26,571.3
Refinery
Attock Refinery**
12,962.8
National Refinery**
14,804.2
Sec. P/E: 10.89
Pakistan Refinery**
3,656.1
Compiled by: Taurus Research
Email: research@taurus.com.pk
Equity
(mln)
Sh. O/S
(mln)
PAT
(mln)
6,522.9
2,618.1
346.8
16,135.3
3,299.2
19,279.0
22,355.6
12,971.4
11,633.0
17,044.7
3,743.1
10,772.1
5,975.0
75,180.4
15,092.8
5,275.8
9,199.5
36,592.0
52,244.9
102,459.2
10,054.7
4,391.4
7,113.0
42,757.1
36,399.4
8,444.2
10,105.9
1,254.4
10,846.5
2,061.3
7,265.7
736.0
304.4
10,124.1
19,330.8
527.8
100,704.3
4,387.6
2,030.5
6,856.5
20,918.4
9,690.7
731.3
11,034.4
23,252.0
6,994.0
3,608.3
10,147.1
17,352.7
2,179.3
283.5
201.6
30.0
375.0
50.0
763.3
711.0
507.3
610.1
1,349.2
528.8
609.1
665.0
910.8
752.8
612.8
401.5
4,043.7
691.1
1,076.4
1,718.0
900.3
501.9
3,871.6
1,112.9
112.5
115.0
75.0
59.9
65.9
300.0
6.2
117.6
449.3
242.5
7.6
310.5
21.3
96.0
325.7
304.2
693.3
29.1
1,312.6
323.4
61.6
255.5
85.3
80.0
35.0
(2,343.0)
243.6
(67.9)
(2,768.9)
206.2
(14,413.4)
4,156.7
386.2
2,425.0
1,301.3
(10,059.5)
1,115.0
621.2
15,614.0
3,277.4
54.8
(973.0)
(350.6)
15,374.6
15,458.6
(517.7)
(2,014.3)
701.0
629.5
9,237.0
1,099.2
(5,471.2)
(473.2)
(377.0)
(267.2)
886.2
25.3
(6.4)
897.3
1,268.0
26.7
1,582.7
654.1
403.7
168.6
525.6
1,007.6
(428.0)
(1,242.5)
4,596.5
1,105.4
2,532.3
1,016.8
1,533.0
(4,571.7)
23
EPS P/E
(Rs) (x)
(8.3)
1.2
(2.3)
(7.4)
4.1
(18.9)
5.8
0.8
4.0
1.0
(19.0)
1.8
0.9
17.1
4.4
0.1
(2.4)
(0.1)
22.2
14.4
(0.3)
(2.2)
1.4
0.2
8.3
9.8
(47.6)
(6.3)
(6.3)
(4.1)
3.0
4.1
(0.1)
2.0
5.2
3.5
5.1
30.7
4.2
0.5
1.7
1.5
(14.7)
(0.9)
14.2
18.0
9.9
11.9
19.2
(130.6)
N.M
3.1
N.M
N.M
18.2
N.M
10.9
34.6
7.9
14.6
N.M
8.9
17.7
7.2
7.0
56.5
N.M
N.M
9.7
5.1
N.M
N.M
8.0
55.3
7.4
12.2
N.M
N.M
N.M
N.M
8.8
97.6
N.M
10.5
12.7
3.7
6.9
3.5
7.5
35.7
16.3
4.2
N.M
N.M
4.5
15.8
10.5
12.7
9.7
N.M
Price Dividend Weightage
26-Nov Yield (%)
(%)
14
3.8
86
47.25
75.25
29.96
63.84
26.36
31.36
14.09
17.5
16.31
16.56
123.07
30.61
5.05
5.75
4.86
215.12
72.69
18.81
4.52
11.16
9
61.7
119.2
94.46
127.31
102.99
53.52
26.02
399
11.9
20.9
66.51
13.04
35.2
106.49
31.57
18.5
28.14
6.13
87
2.12
63.49
284.26
104
151.98
185.13
104.46
0.00
26.32
0.00
3.17
13.29
0.00
3.92
0.00
3.99
0.00
0.00
0.00
0.00
4.47
0.00
0.00
0.00
0.00
5.35
8.94
0.00
0.00
0.00
0.00
4.05
2.10
3.44
3.53
1.46
2.80
4.80
0.38
0.00
0.00
3.01
0.00
4.26
0.94
3.96
0.00
0.00
0.00
0.00
0.00
6.30
3.17
7.74
0.00
6.75
1.37
0.18%
0.04%
0.12%
0.82%
0.17%
1.06%
2.10%
0.62%
0.89%
0.88%
0.43%
0.46%
0.51%
5.19%
1.07%
0.14%
0.11%
0.91%
6.88%
3.62%
1.50%
0.19%
0.26%
1.61%
3.18%
0.62%
0.50%
0.44%
0.29%
0.16%
0.36%
0.11%
0.06%
0.43%
0.75%
0.00%
0.51%
0.11%
0.14%
0.28%
0.40%
0.20%
0.12%
0.13%
0.95%
0.81%
1.23%
0.60%
0.69%
0.17%
Taurus Securities Limited
Sector
Company
Power Gen. & Dist. K.E.S.C.**
Kohinoor Energy***
Kot Addu Power Co. Ltd**
Sec. P/E: 7.82
Hub Power Company**
Oil & Gas Mkt
Attock Petroleum Ltd**
Pakistan State Oil**
Shell Pakistan
Sui Northern Gas Ltd**
Sec. P/E: 6.29
Sui Southern Gas**
Oil & Gas Expl.
Mari Gas**
(E&P Sector)
O G D C**
Pakistan Oilfields**
Sec. P/E: 7.66
Pakistan Petroleum Ltd**
Engineering
International Industries**
Auto Assembler
Al-Ghazi Tractors
Atlas Honda
Indus Motors**
Sec. P/E: 6.99
Pak Suzuki Motors
Auto & Allied
Agri Auto Industries Ltd.**
Cables & Elect.
Siemens Engineering
Transport
P.I.A.C. (A)
P.I.C.T**
Sec. P/E: 5.42
P.N.S.C.**
Tech. & Comm.
PTCL**
Fertiliser
Dawood Hercules
Engro Chemical
Fauji Fertiliser Bin Qasim
Sec. P/E: 10.14
Fauji Fertilizer
Pharmaceutical
Abbot Laboratories
Sec. P/E: 11.3
GlaxoSmith-Kline Pak Ltd.
Chemicals
Colgate Palmolive**
Engro Polymer & Chem.
ICI Pakistan
Sec. P/E: 13.35
Pak PTA Ltd.
Paper & Board
Packages Limited
Valaspati & Allied Wazir Ali Ind.**
Leather & Tenn. Bata Pakistan Ltd
Food & Per. Care Nestle Pakistan
Rafhan Maize
Unilever Pakistan Ltd.
Sec. P/E: 20.04
Unilever Foods Ltd
Glass & Ceramics Ghani Glass**
Miscellaneous
Dreamworld Ltd**
Pak Services
Value Call: November 2009
Mkt. Cap
(mln)
11060.3
5456.6
40658.9
34853.5
19271.8
51172.9
16913.8
14002.2
8966.9
5216.3
457575.8
52428.0
181596.9
6194.5
9230.9
6445.1
17115.9
7667.9
1817.9
11140.9
5332.5
11953.4
6405.1
66913.0
18717.7
54070.6
24286.9
72616.0
9446.4
16529.6
9669.8
9965.0
22717.8
11598.8
12100.0
71.9
7000.6
54420.0
14316.4
30582.6
8473.0
5025.7
18080.0
4611.6
Equity
(mln)
-8737.5
6703.3
23083.2
29532.4
7082.3
20870.8
13611.6
16147.5
9683.5
6281.4
126171.4
23559.3
63058.6
2660.3
4427.8
3404.2
10297.0
13977.0
1442.2
6288.3
-46701.9
2964.6
15834.7
99389.6
17382.7
23084.1
10486.4
12285.2
3568.5
8354.9
2700.2
6565.9
12683.9
4067.1
16272.6
-213.7
1435.7
4388.8
3486.1
2215.8
301.2
3460.9
345.2
2371.9
Sh. O/S
(mln)
4608.5
169.5
880.3
1157.2
57.6
171.5
68.5
549.1
671.2
36.8
4300.9
236.5
995.8
99.9
42.9
54.4
78.6
82.3
28.8
8.2
2141.6
109.2
132.1
3774.0
109.4
297.9
934.1
678.5
97.9
170.7
27.5
520.4
138.8
1514.2
84.4
8.0
7.6
45.3
9.2
13.3
6.2
97.0
32.0
32.5
(*) Companies have PAT & Equity of 2007, while others have 2008 data
N.A = Not Available, N.M = Not Meaningful
(**) Companies have equity, dividend yield and PAT of 2009
24
PAT
(mln)
EPS
(Rs)
P/E
(x)
Price Dividend Weightage
26-Nov Yield (%)
(%)
-15484.9
-3.4
N.M
2.4
905.1
5.3
6.0
32.2
5672.4
6.4
7.2
46.19
3781.0
3.3
9.2
30.12
3082.4 53.5
6.3 334.58
-6698.5 -39.1
N.M 298.35
5137.1 75.0
3.3 246.96
930.5
1.7 15.0
25.5
257.5
0.4 34.8
13.36
2151.9 58.6
2.4 141.94
55539.6 12.9
8.2 106.39
5618.3 23.8
9.3 221.64
27702.8 27.8
6.6 182.36
374.8
3.8 16.5
62
1113.3 25.9
8.3 214.99
703.0
12.9
9.2 118.49
1385.1 17.6 12.4 217.76
2774.5 33.7
2.8
93.17
273.4
9.5
6.6
63.12
1679.1 203.6
6.6 1350.9
-35880.2 -16.8
N.M
2.49
935.7
8.6 12.8 109.51
2448.5 18.5
2.6
48.5
9151.2
2.4
7.3
17.73
3062.7 28.0
6.1 171.12
4240.4 14.2 12.8 181.48
2899.6
3.1
8.4
26
6525.1
9.6 11.1 107.02
344.0
3.5 27.5
96.49
1955.2 11.5
8.5
96.85
750.0
27.3 12.9 352.01
353.3
0.7 28.2
19.15
2068.9 14.9 11.0 163.67
-1760.5
-1.2
N.M
7.66
-195.8
-2.3
N.M
143.4
-55.9
-7.0
N.M
9
477.8
63.2 14.7
926
1552.9 34.2 35.0 1200.01
1492.4 161.6
9.6
1550
1984.3 149.3 15.4 2300.5
348.5
56.6 24.3 1376.02
712.8
7.3
7.1
51.82
5.0
0.2 3652.1
565
649.5
20.0
7.1 141.79
0
13.98
13.96
11.12
7.47
1.68
20.25
0.00
0.00
2.27
7.75
8.12
7.13
3.63
16.28
2.74
4.59
1.07
3.17
6.66
0.00
2.74
6.19
8.46
1.46
3.31
10.96
12.85
5.18
9.81
3.27
0.00
3.97
0.00
0.00
0.00
0.86
3.46
6.45
5.35
2.62
5.79
0.18
1.06
KSE-100 INDEX
9,206.21
Market Cap. (Rs m)
P/E (x)
Cash Yield (%)
ROE (%)
2,160,326
8.50
6.22
19.59
0.51%
0.25%
1.88%
1.61%
0.89%
2.37%
0.78%
0.65%
0.42%
0.24%
21.18%
2.43%
8.41%
0.29%
0.43%
0.30%
0.79%
0.35%
0.08%
0.52%
0.25%
0.55%
0.30%
3.10%
0.87%
2.50%
1.12%
3.36%
0.44%
0.77%
0.45%
0.46%
1.05%
0.54%
0.56%
0.00%
0.32%
2.52%
0.66%
1.42%
0.39%
0.23%
0.84%
0.21%
Taurus Securities Limited
Value Call: November 2009
KSE-100 STATISTICS
November 26, 2009
20 Lowest P/E x Stocks
20 Lowest P/BV x Stocks
Top 20 EPS Stocks (Rs)
Mari Gas
2.4
Ibrahim Fibers
0.1
Siemens Engineering
203.6
P.N.S.C.
2.6
Bannu Woollen
0.2
Rafhan Maize
161.6
Pak Suzuki Motors
2.8
WorldCall Telecom
0.2
Unilever Pakistan Ltd.
149.3
Attock Cement
3.0
KASB Bank
0.3
Shell Pakistan
75.0
First Habib Modaraba
3.1
Lafarge Cement
0.3
Bata Pakistan Ltd
63.2
Shell Pakistan
3.3
First Habib Modaraba
0.3
Mari Gas
58.6
Thal Limited
3.5
P.N.S.C.
0.4
Unilever Foods Ltd
56.6
Bannu Woollen
3.7
D.G. Khan Cement
0.4
Attock Petroleum Ltd**
53.5
Fauji Cement
4.2
Fauji Cement
0.4
Millat Tractors
41.5
Lucky Cement
4.5
Thal Limited
0.5
Nestle Pakistan
34.2
National Bank
5.1
NIB Bank
0.5
Pak Suzuki Motors
33.7
Dawood Hercules
6.1
Pak Suzuki Motors
0.5
Thal Limited
30.7
Attock Petroleum Ltd
6.3
IGI Insurance
0.6
Dawood Hercules
28.0
Pakistan Petroleum Ltd
6.6
JS Bank Limited
0.6
Pakistan Petroleum Ltd
27.8
Siemens Engineering
6.6
PICIC Growth Fund
0.6
Colgate Palmolive
27.3
Agri Auto Industries Ltd.
6.6
PTCL
0.7
Al-Ghazi Tractors
25.9
Ibrahim Fibers
6.9
Packages Limited
0.7
Pakistan Oilfields
23.8
Habib Metropolitan Bank
7.0
National Bank
0.8
MCB Bank Ltd.
22.2
Ghani Glass
7.1
Soneri Bank
0.8
Pak Services
20.0
Pak Services
7.1
Kohinoor Energy
0.8
National Refinery
19.2
Top 20 ROE Stocks (%)
Unilever Foods Ltd
115.71
Top 20 Market Cap Stocks (Rsm)
Top 20 Div. Yld Stocks (%) C
OGDC
457,576
First Habib Modaraba
27.32
Unilever Pakistan Ltd.
89.56
Pakistan Petroleum Ltd
181,597
Shell Pakistan
20.00
Pakistan Tobacco
70.18
MCB Bank Ltd.
148,670
Al-Ghazi Tractors
15.53
Fauji Fertilizer
53.11
Habib Bank
112,092
Kot Addu Power Co. Ltd
14.00
OGDC
44.02
National Bank
78,241
Kohinoor Energy
13.85
Pakistan Petroleum Ltd
43.93
Fauji Fertilizer
72,616
Fauji Fertilizer
13.09
Attock Petroleum Ltd
43.52
United Bank Limited
68,665
Millat Tractors
12.67
Rafhan Maize
42.81
PTCL
66,913
JS Global
12.60
Shell Pakistan
37.74
Nestle Pakistan
54,420
Fauji Fertiliser Bin Qasim
11.56
Millat Tractors
36.05
Engro Chemical
54,071
Hub Power Company
11.54
Nestle Pakistan
35.38
Pakistan Oilfields
52,428
GlaxoSmith-Kline Pak Ltd.
9.26
Mari Gas
34.26
Pakistan State Oil
51,173
Pakistan Oilfields
8.34
Bata Pakistan Ltd
33.28
Allied Bank Limited
45,390
OGDC
7.96
P.I.C.T
31.56
Kot Addu Power Co. Ltd
40,659
PTCL
7.96
Attock Cement
31.25
Hub Power Company
34,853
National Bank
7.90
7.48
East West Insurance Co.Ltd.
30.67
Standard Chartered Bank
34,844
Attock Petroleum Ltd
MCB Bank Ltd.
29.43
Royal Bank
32,315
Pakistan Petroleum Ltd
7.45
Colgate Palmolive
27.77
Unilever Pakistan Ltd.
30,583
Pakistan Tobacco
7.42
Fauji Fertiliser Bin Qasim
27.65
Pakistan Tobacco
26,571
National Refinery
6.42
Pak Services
27.38
Fauji Fertiliser Bin Qasim
24,287
Siemens Engineering
6.32
25
Taurus Securities Limited
Value Call: November 2009
KSE-100 Sector Statistics
P/Ex
Mutual Funds
Modaraba
Leasing Cos.
Inv Co. / Banks
Commercial Bank
Insurance
Textile Spinning
Textile Weaving
Textile Composite
Woollen
Syn. & Rayon
Jute
Sugar
Cement
Tobacco
Refinery
Power Gen. & Dist.
ROE(%)
nm
3.1
nm
11.3
8.4
11.3
10.5
12.7
6.9
3.5
7.5
3.0
35.7
5.4
12.1
10.9
7.6
nm
9.30
nm
7.14
14.12
4.06
8.86
6.56
1.59
14.91
19.88
31.25
2.46
9.06
34.31
8.59
19.86
20 Lowest PEG Stocksa
Top 20 Liquid Shares (m)
P/Ex
ROE(%)
5.3
7.8
8.3
6.8
6.6
nm
6.8
37.9
10.1
11.3
13.4
nm
14.7
20.0
7.1
34.7
8.50
12.73
41.42
25.14
19.55
26.7
nm
10.61
0.55
26.45
19.28
12.19
nm
33.28
51.75
20.59
24.09
19.59
Oil & Gas Marketing
Oil & Gas Expl.
Engineering
Auto Assembler
Auto & Allied
Cables & Elect.
Transport
Tech. & Comm.
Fertiliser
Pharmaceutical
Chemicals
Paper & Board
Leather & Tenn.
Food & Per. Care
Glass & Ceramics
Miscellaneous
KSE-100 Index
10 Highest/Lowest Rel. Perf.
Jah.Siddiq.Co
9.99
Mari Gas
0.07
Javedan Cement**
43%
Oil & Gas Dev.
8.51
Lucky Cement
0.10
Lakson Tobacco Comp.
35%
D.G.K.Cement
7.53
Attock Petroleum Ltd
0.11
Meezan Bank
28%
Arif Habib
6.86
Shell Pakistan
0.12
Attock Refinery**
21%
Pak.PTA Ltd.
6.85
PICT
0.12
Nakshbandi Industries**
19%
P.T.C.L.A
6.18
Pak Services
0.13
Unilever Foods Ltd
17%
Bank Alfalah
6.17
Thal Limited
0.15
Indus Motors**
16%
National Bank
5.91
Fauji Cement**
0.16
Bank Of Punjab
15%
Lucky Cement
4.82
National Bank
0.17
Bannu Woollen
14%
Fauji Fert Bin
3.95
Nishat Mills
0.18
P.I.C.T**
14%
Nishat Mills
3.86
Allied Bank Limited
0.18
Bestway Cement
-23%
Pak Oilfields
3.59
Habib Metropolitan Bank
0.19
KASB Bank
-16%
MCB Bank
3.06
Pakistan Petroleum Ltd
0.20
Pakistan Reinsurance
-16%
Adamjee Ins.
3.03
Pakistan Tobacco
0.21
Fazal Textile**
-16%
B.O.Punjab
2.97
MCB Bank Ltd.
0.21
Jahangir Siddiqui & Co**
-15%
Engro Chemical
2.87
Habib Bank
0.23
PICIC Growth Fund**
-14%
PPL
2.77
Ibrahim Fibers
0.26
Azgard Nine Limited
-14%
Hub Power
2.69
Ghani Glass
0.27
E.F.U. Life Assurance
-13%
Fauji Cement
2.26
United Bank Limited
0.29
P.N.S.C.**
-12%
Fauji Fertilizer
2.12
Siemens Engineering
0.32
National Bank
-12%
a
growth taken over last 5 years
26
Rel. Perfomance taken over MoM
Taurus Securities Limited
Value Call: November 2009
ECONOMIC INDICATORS
FY03
FY04
FY05
FY06
FY07
FY08 FY09A/P
Nominal GDP (Rs billions)
Real GDP Growth (%)
Large Scale Manufacturing Growth(%)
Agriculture Growth (%)
Major Crops: Wheat (m tons)
Cotton (m bales)
Sugarcane (m tons)
Rice (m tons)
Services Sector Growth (%)
4823
4.8
7.2
4.1
19.2
10.2
52.1
4.5
5.2
5533
6.4
18.2
2.2
19.5
10.0
53.4
4.8
6.0
6548
8.4
15.4
7.5
21.6
14.3
47.2
5.0
7.9
7195
5.8
8.3
6.3
21.6
14.3
47.2
5.0
6.5
8235
6.8
8.7
4.1
21.3
13.0
44.7
5.5
7.0
9962
4.1
4.0
1.1
23.3
12.9
54.7
5.4
6.6
12460
2.0
(7.7)
4.7
21.0
11.7
63.9
5.6
3.6
Exports (US$ millions)
Growth (%)
Imports (US$ millions)
Growth (%)
Trade Balance (US$ millions)
Current Account Balance (US$ millions)
11160
22.2
12220
18.2
(1060)
3050
12313
10.3
15592
27.6
(3279)
280
14391
16.9
20598
32.1
(6207)
(1070)
16451
14.3
28581
38.8
(12130)
(4990)
16976
3.2
30540
6.9
(13564)
(6878)
19052
12.2
39966
30.9
(20914)
(13874)
17782
(6.7)
34822
(12.9)
(17040)
(8861)
SBP Foreign Exchange Reserves (US$ millions)
Exchange Rate (Rs per US$)
% change
9285
58.5
(4.8)
10326
57.6
(1.6)
9578
59.4
3.1
10765
59.9
0.8
13345
60.6
1.3
8577
62.5
3.2
9118
81.3
29.9
Total External Liabilities (US$ billions)
Domestic Debt (Rs billions)
of which:
Permanent (Rs billions)
Floating (Rs billions)
Unfunded (Rs billions)
35.5
1854
35.3
1979
35.8
2129
37.6
2322
40.5
2601
46.3
3266
52.8
3851
427
516
910
537
543
899
501
778
850
500
941
882
553
1108
940
608
1637
1020
678
1904
1269
Tax Revenue (Rs billions)
Budgetary Expenditures (Rs billions)
Budgetary Deficit (% of GDP)
459
861
3.7
510
899
2.3
590
1001
3.3
704
1196
4.2
840
1365
4.3
1010
1921
7.6
1181
2101
5.2
(56.0)
0.6
18.0
63.7
23.7
19.6
60.2
22.2
19.1
70.9
16.1
15.1
102.0
14.2
19.3
554.6
29.3
15.4
316.4
15.4
9.6
3.1
3.8
4.6
6.0
9.3
11.1
7.9
7.8
7.8
9.4
12.0
14.2
20.8
22.7
Borrowing for Budgetary Support (Rs billions)
Credit Expansion (%)
M2 Growth (%)
Consumer Price Index (FY91=100)
Sensitive Price Index (FY91=100)
Source : SBP Annual Reports
27
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