53rd AGM Presentation – March 26, 2013
Highlights and Lowlights 2012
•
Highlights:
– Investment Portfolio outperformed the KSE-100 Index by 7% (56% vs 49%)
– Company reduced its exposure in ENGRO and DAWH and invested the proceeds in high
dividend yielding stocks.
– The market capitalization of the company grew by 59% from Rs.1,955 million to Rs.
3,107 million.
– 40% Cash Dividend & 50% bonus payout.
•
Lowlights:
– Share trading at 30% discount to book value
2
Our Investment Strategy
Goal
Achievement
Generate gross returns greater than 14% on the Portfolio has beaten the agreed upon hurdle rate
portfolio while generating cash flows (dividend) with YTD return of 56% vs target of 14%. Cash
from investments of at least Rs.200m.
target crossed PKR 300m against benchmark of
Rs.200m.
Portfolio allocations to be focused towards high Cyan fully offloaded its exposure in fertilizer
yield/low growth investments from high sector stocks like ENGRO and DH Corp. and
growth/low yield;
diverted the proceeds to high dividend yielding
stocks like HUBCO, POL, KAPCO.
Reduce Exposure to Related Parties.
Cyan fully offloaded ENGRO & substantially
offloaded DH Corp. to reduce the related parties
exposure.
3
Our Sector Focus
Sector
Banks
Capital Gains: Rs. 56 Mln
Dividend Income: Rs. 21 Mln
Total : Rs. 77 Mln
Oil & Gas
Capital Gains: Rs. 78 Mln
Dividend Income: Rs 49 Mln
Total : Rs. 127 Mln
IPP
Capital Gains: Rs. 596 Mln
Dividend Income: Rs 179
Total : 775 Mln
Cyan Exposure
In May 2012, minimum savings rate were revised upward from 5% to
6%. SBP’s aggressive stance to reduce DR by 250 bps also made this
sector unattractive due to contraction in NIMs. The company preferred
to stay sideline in this sector and preferred selective stocks like UBL and
NBP due to dividend yielding.
Due to stable Oil & gas production during the year the company has
taken selective exposure in OGDC and PPL, however a decent exposure
was maintained in POL being the only private play in the sector and
completely immune to circular debt and with most attractive dividend
yield.
Due to aggressive reduction in DR together with rupee devaluation
made this sector the most attractive. The company has taken full
opportunity out of it and heavily invested in Hubco, Kapco and NPL.
Hubco contributed Rs. 730 million (Rs. 572 million as capital gains and
Rs. 158 million as dividend).
4
Our Sector Focus
Sector
Cement
Capital Gains: Rs. 111 Mln
Dividend Income: Rs 7 Mln
Total: 118 Mln
Telecommunication
Capital loss: Rs. (21) Mln
Dividend Income: Nil
Total : (21)
Cyan Exposure
2012 was a turn around year for the cement industry whereby
cement demand was up by 3%, prices up by 7%, retention levels up
9% YoY and coal prices down by 22% on average. The company had
best availed the opportunity and took timely exposure in Lucky and
DG Khan cement and booked decent gains.
Interest rejuvenated on back of ICH. Key ingredients were 1)
increase in Approved Settlement Rate (ASR) and 2) centralized
termination of inbound international calls. The company acquired a
large position in PTCL and retained it till December 31, 2012 and is
expected to reap the benefits from PTCL during the first quarter
2013.
5
Our Sector Focus
Sector
Chemicals
Capital Gains: Rs. 520 Mln
Dividend Income: Rs 26 Mln
Total : Rs. 546 Mln
Textiles
Capital Gains: Rs. 18 Mln
Dividend Income: Rs 5 Mln
Total : Rs. 23 Mln
Cyan Exposure
The company has completely offloaded its stake in Engro and
substantially in DH Corp. for reducing the concentration risk, however,
the company maintained to remain sideline in this sector (except for
Fatima) due to the following reasons:
 3rd consecutive year of decline in fertilizer sales;
 Influx of cheap imported urea has weakened pricing power of the
local industry
 Severe curtailment of gas supply to SNGPL based fertilizer plants.
The textile sector performance has been skewed towards 2H 2012 as key
triggers played out during this time-frame including (1) cumulative
250bps DR cut and 150bps decline in ERF rates, (2) implementation of EU
trade preferences package (3) Rupee devaluation benefiting textile
exporters. The company has taken position in leading textile company like
Nishat Mills and retained it till December 31, 2012.
6
Star performer for the year 2012 – HUB Power
On March 22, 2012, the company in collaboration with other
Dawood Group companies entered into an arrangement to
acquire 190m shares of Hub Power (HUBC) from International
Power. A Share purchase agreement was executed by Cyan for
32.2 m shares of HUBC @ Rs.31.33 per share and after all the
regulatory approvals the shares were transferred on 11 June,
2012.
The proceeds from the sale of Engro was diverted for acquiring
32.2m shares of HUBC amounting to Rs.1.0b This strategy
worked well for the company. During the year the company has
offloaded 32.2m shares. This transaction has contributed Rs.528
(Rs.431 as capital gains and Rs.97 million as dividend income)
7
Capital Gains Realized – Rs.1,239 Million
Equity : Mutual Fund
Mutual Fund, 76
Equity, 1,163
FFCL, 38
UBL, 29
POL, 24
DGKC, 29
BAFL, 16
LUCKY, 52
MLCF, 11
Others, 46
HUBCO, 431
Engro, 487
8
Dividend Income
December 31, 2012 - Rs.302 Million
FFCL, 5
UBL, 5
NPL, 5
Others, 33
PPL, 6
DAWH, 7
NBP, 11
KAPCO, 14
HUBCO, 159
Engro, 20
POL, 37
9
Diversification of Investments
2011
2012
25%
14%
35%
47%
Shares - related parties
Shares - others
51%
Mutual Funds & Debt
28%
Shares - related
parties
Shares - others
Mutual Funds & Debt
The company has reduced its exposure to related parties and diverted it to cash generating
assets like dividend yielding stocks i.e. KAPCO and POL; and Mutual funds.
10
Contribution to Profitability (Rs.in Million)
1,600
1,428
1,400
1,239
1,200
1,000
800
600
400
200
302
177
299
(200)
Dividends
capital gain
Impairment
(51)
(400)
PAT
(198)
(600)
(601)
(800)
(1,000)
2012
2011
11
Investment Income (Rs.in Million)
1,736
1,800
1,300
800
300
(200)
180
2010
2011
(119)
2012
(700)
12
Dividend Income(Rs.in Million)
350
300
250
200
302
150
100
147
176
50
0
2010
2011
2012
13
Sector Breakup - Top Ten Holdings
Portfolio Break-up based on Top ten * Holding as at
December 31, 2012
DGKC, 9%
Fatima, 3%
HUBCO, 12%
DLL, 4%
PTCLA, 6%
NML, 5%
PPL, 8%
Cash & Mutual
Funds, 42%
POL, 6%
KAPCO, 5%
* Top ten holdings represent 83% of the total portfolio
14
CYAN vs KSE 100
65.00%
60.00%
55.00%
50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
56%
49%
15
Dividend Pay out (Rs.in Million)
2012
215
2011
98
67
2010
0
50
100
150
200
250
16
Return to Shareholders’
Particulars
2012
Market Capitalization (Jan 01) – Rs. In Million
1,955
Market Capitalization (Dec 31) – Rs. In Million
3,107
Capital Appreciation (mainly due to 50% bonus pay out)
Dividend Yield (payout Rs. 1 - Interim, Rs. 3 - Final)
59%
8%
Return to Shareholders for the year 2012
67%
KSE Index
49%
17
Outlook
•
The company is actively undertaking growth equity and portfolio investment business under
the new structure .
•
Implement the new business model to deliver superior risk adjusted return to the
shareholders.
18
Questions
19