Important Disclosures at the end of report www.saaocapital.com Engro - Pakistan’s only Conglomerate PKR277; Target 339; Upside Potential 22.3% 29 January 2008 SAAO C A P I T A L EQUITY MONITOR KATS ENGRO Reuters EGCH.KA Bloomberg ENGRO PA Increased globalization and aggressive M&A activity have resulted in yielding conglomerates that have generated larger secondary market appetites due to its diversified nature of business along with a lower risk premium. In Pakistan, we have seen M&A activity recently in the financial sector mainly Banking and leasing companies, but other transactions have been limited to horizontal or vertical integration between industry segments. Engro Chemicals over the years with its focused management and diversified long term investments theme which includes JV’s and fully owned subsidiaries in an array of business segments has emerged as Pakistan’s first and only conglomerate among the listed companies at the KSE. Pakistan’s demand for agricultural products is likely to increase with its above normal inclining population base, a limited number of fertilizer producers in the country and a current shortage of supply, Engro is likely to become the first mover in a post expansionary stage of the fertilizer sector where any market share captured will remain so for some coming time as no future expansions are eyed by the other two major producers, Fauji Fertilizer Co. (KSE: FFC) and Fauji Fertilizer Bin Qasim (KSE: FFBL). Currently, Engro is the second largest producer of Urea in the country with a market share of 19%. As announced by the management the company is undertaking one of the largest expansions in the history of the country at a cost of $970mn to increase its capacity to 2,275,000 tons p.a. from its existing capacity of 975,000 tons. The expansion is likely to be completed by April 2010 while full utilization will come online by CY11. The expansion is likely to increase Engro’s market share to 35% highest amongst peers. Using a sum-of-the-parts (SOTP) method to determine a fair value for Engro Chemicals and its investments in JV’s and fully owned subsidiaries we have arrived at a fair value of PKR265 fro Engro’s fertilizer business and PKR74 for its stake or holdings in other businesses, which adds upto PKR339 as our target price for December 08. Index Weight(%) 1.47 Mkt cap(PKR)(bn) 53.6 Mkt cap($)(mn) 895.5
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Important Disclosures at the end of report www.saaocapital.com
Engro - Pakistan’s only ConglomeratePKR277; Target 339; Upside Potential 22.3%
29 J
anua
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008
SAAOC A P I T A L
EQUITY MONITOR
KATS ENGROReuters EGCH.KABloomberg ENGRO PA
Increased globalization and aggressive M&A activity have resulted in yielding conglomerates that have generated larger secondary market appetites due to its diversified nature of business along with a lower risk premium.
In Pakistan, we have seen M&A activity recently in the financial sector mainly Banking and leasing companies, but other transactions have been limited to horizontal or vertical integration between industry segments. Engro Chemicals over the years with its focused management and diversified long term investments theme which includes JV’s and fully owned subsidiaries in an array of business segments has emerged as Pakistan’s first and only conglomerate among the listed companies at the KSE.
Pakistan’s demand for agricultural products is likely to increase with its above normal inclining population base, a limited number of fertilizer producers in the country and a current shortage of supply, Engro is likely to become the first mover in a post expansionary stage of the fertilizer sector where any market share captured will remain so for some coming time as no future expansions are eyed by the other two major producers, Fauji Fertilizer Co. (KSE: FFC) and Fauji Fertilizer Bin Qasim (KSE: FFBL).
Currently, Engro is the second largest producer of Urea in the country with a market share of 19%. As announced by the management the company is undertaking one of the largest expansions in the history of the country at a cost of $970mn to increase its capacity to 2,275,000 tons p.a. from its existing capacity of 975,000 tons. The expansion is likely to be completed by April 2010 while full utilization will come online by CY11. The expansion is likely to increase Engro’s market share to 35% highest amongst peers.
Using a sum-of-the-parts (SOTP) method to determine a fair value for Engro Chemicals and its investments in JV’s and fully owned subsidiaries we have arrived at a fair value of PKR265 fro Engro’s fertilizer business and PKR74 for its stake or holdings in other businesses, which adds upto PKR339 as our target price for December 08.
Table of ContentsFertilizer Sector in Pakistan 4Fertilizer Consumption Dynamics Agricultural SectorWheat & Urea DynamicsSupply & Demand ScenarioFertilizer Sectors Future
Background 5Product Lineup
Management 5Chairman: Mr. Hussain DawoodPresident: Mr. Asad Umar
Disclosure Policy 5
Market Share Analysis 6 Key Strengths 7Urea Demand to remain upbeatNew Plant to Increase market share to 35%Value Addition through 100% owned subsidiaries and JV’sListings of Investments
Risks to Valuation 7Feedstock no Dollar HedgedLimited Growth potential from core business CY07-CY10Reduction in Urea Off-takeReduction in fertilizer prices Globally
Pakistan has a population of over 150 million people, growing at an annual rate of 2 percent, with almost a third living below the poverty level. A threefold increase in food crop production during the past thirty years has been made possible by a thirteen fold increase in fertilizer use. However, fertilizer usage is far removed from known, recommended practices with consequent inefficiencies, loss of yield, financial waste and the loss of plant nutrients to the environment still persist.
Fertilizer Consumption Dynamics
The Rabi season remains the most demanding of agricultural chemicals and fertilizers mainly because it is during this season that dry land crops such as wheat and pulses are grown witnessed by a high correlation to fertilizer sales, looking at the historical financial statements it is noticed that the 4Q of the CY remains the peak period of demand.
Since DAP is produced only by FFBL and the remainder demand is met by imports any inventory buildup on this front by Engro is likely to translate into holding gains with respect to import price and sale price differentials.
Agricultural Sector
Pakistan remains a country with an agrarian backbone which is further emphasized by the GoP’s concentration on enhanced fertilizer usage benefitting the agricultural sector in improving quality and maximizing crop cultivation per acre. Historically, the agricultural sector contributes to approximately 20% of the GDP which remains heavily dependent on fertilizer consumption that has shown an increase of 5.3% CAGR over the last four years.
Wheat & Urea Dynamics
Although the agricultural sector has not seen rapid economic growth as witnessed by the services sector over the past 5 years, but even though with better credit facilities offered by banks to farmers, effective water management and higher support prices for wheat, the future of this sector remains strong. 35% of Urea and 50% of DAP demand is for wheat cultivation, highlighting a correlation between them, this event usually occurs during the Rabi season.
Supply & Demand Scenario
The shortage between domestic demand and production is likely to keep the demand intact, another concern is the differential between international prices and local prices, also with GoP continued efforts in improving productivity by adopting innovative techniques and less wastage. During CY07-CY10, supply constraints are likely to exist with all major producers operating at full capacity utilization. It is estimated that domestic demand is likely to surpass 7.5mn tons by CY11 for which a number of fertilizer producers have taken up BMR or expansion programs.
Fertilizer Sector’s Future
The demand for fertilizer products is projected to grow at a CAGR of 4.5%, which has two major components Urea, likely to grow by 3.5% and DAP, demand to grow at 7% in line with the GoP initiative of better yielding crop cycles. These two add upto 90% of total fertilizer demand in the country. In retrospect to the off-take figures it seems evident that in an post expansionary phase, there will still be a shortage of 1mn tons p.a. The trend witnessed throughout CY07 for DAP prices was on the rise which will eventually increase demand for Urea, if the phenomenon of higher prices continues DAP sales for CY08 may see stagnation in the short term.
Engro Chemicals Limited is the second largest producer of Urea fertilizer in the country. The company was incorporated in 1965 by Exxon Chemical Pakistan Limited (formerly known as ESSO) as part of their oil and gas exploration activity after the successful exploration of Mari Gas near Dharaki. As part of Exxon’s global strategy in 1991 of exiting the fertilizer business, it divested its 75% equity stake, acquired by Exxon’s ex-employees as a management buyout in alliance with a consortium of local and international financial institutions which was later renamed as Engro Chemicals Limited.
The core business of the company is manufacturing and distributing chemical fertilizers. Pakistan remains on the list of fertilizer hungry nations which has an agrarian economic backbone and a population base of 170mn people. The capacity of Engro has increased from 270,000 tons in 1991 to approximately 975,000 tons of urea by the end of CY07 as a result of numerous de-bottlenecking and BMR activities initiated over the years.
Product LineupEngro Chemicals Limited is engaged in the production and distribution of the following:
Category Brand Name Production Site Urea fertilizer Engro Dharaki Plant NPK fertilizers Zarkhez Port Qasim Plant MAP fertilizer Zorawar ImportedDAP fertilizer Zorawar Imported Micronutrients Zinc Sulphate ZingroMicronutrients Boron Zoron
Management
Engro Chemicals is the creation of a management buyout of Exxon Chemicals in 1991, the first ever in the corporate history of Pakistan, signaling the level of determination and focus of management towards the well being of the organization. Due its broad based ownership structure the company has done well in diversifying its business model from concentration in fertilizers to now energy, milk and food, chemical storage, technology, PVC resins and re-branding and distribution services.
In corporate Pakistan, Engro Chemical holds a spot parallel to none with the collection of Karachi Stock Exchange’s Top Companies Award for 22 times, highest by any firm at the exchange and by also being selected on the Forbes list of Asia’s 200 best managed companies under a billion dollars.
Chairman
Mr. Hussain Dawood of Dawood Group currently chairs the BoD of Engro with his 42% stake in the company. Exxon’s divestment created an opportunity for Mr. Dawood to increase his stake in this well managed multinational company through the Dawood Group (parent company) that is also engaged in the fertilizer business through Dawood Hercules (KSE:DAWH), a JV between Dawood Group and Hercules USA, a company specializing in the manufacturing and marketing of Urea and Anhydrous Ammonia. The Dawood group itself is a well diversified entity owning a range of businesses from textiles to insurance and from fertilizers to financial services. The group functions with a repute realized by a select few in Pakistan’s corporate environment.
PresidentMr. Asad Umar, who has held previous assignments at Exxon, Canada and at Engro Chemicals has over 22 years of experience in finance, marketing and business planning. The management has a number of other key individuals who remain pivotal in the excellence of there business segments. Mr. Umar is also a non-member director at the country’s premier bourse, KSE.
Disclosures in Pakistan are rare instances, but Engro is one of the select few companies which has regular quarterly analyst briefings and the announcement of any new event is also presented to analysts and copies of the above are also available on Engro’s website. Although better disclosure regarding the diversified products and services base of the company in the future is likely to reflect on the share price of Engro.
In deriving a fair value for Engro Chemicals it is important to note that due to its complex investments in subsidiaries and joint ventures in unlisted companies with limited availability of data makes it difficult in ascertaining financial projections of those companies and assigning them fair values.
Engro Chemicals is the second largest Urea producer in the country after Fauji Fertilizer Co. (KSE:FFC) followed by Fauji Fertilizer Bin Qasim (KSE: FFBL) and other smaller fertilizer plants. Below is a graphical representation of the current market share held by Engro in contrast with other competitors and the projected market share once the industry moves in a post expansionary phase.
FFBLANL
6%
DAWH8%
FATIMA15%
NFC3%
FFC31%
Engro19%
FFBL16%
FATIMA
Engro35%
DAWN 6%
ANL4%
NFC2%FFC
23%
In the post expansion phase of the fertilizer industry Engro is likely to become the market leader by holding 35% of the market share. These projected figures are based on a 100% capacity utilization basis, any increase in off-take persisting would further push Engro’s market share higher. This jump in position is a consequence of a 1.3mn ton urea capacity expansion facility costing $970mn which is currently underway, likely to commence production in April 2010.
In view of Pakistan’s agrarian economic backdrop synchronized with a healthy population base inclining at a rapid pace, the demand for chemical fertilizers is likely to remain upbeat. Analyzing the Urea industry situation in CY06 which was a corrective year in terms of demand growth after a 10% rise in demand in CY05, the total urea sales were at 5.2mn tons while domestic production stood at 4.8mn tons, total demand during 9m07 was recorded at 1.3mn tons
New plant to increase market share to 35%
Engro’s expansionary agenda is likely to raise its urea production level from 975,000 tons to 2.275mn tons by CY11 to meet the expected deficit of 1.2mn tons in domestic production. This move would boost Engro’s market share to 35% from 19% as of now and would result in huge savings to the national exchequer arising from the price differential of local and imported prices. This expansion is estimated to cost $970mn according to the company’s projection as elaborated under the analyst’s briefing on the 1 October, 2007, raised through a combination of debt, rights issue, additional capital and profit retention. Upon commencement of the new urea facility we expect Engro’s cashflows to improve and boast off EBITDA CAGR of 78% during CY11-CY13E.
Value Addition through 100% owned subsidiaries and JV’s
Another key potential exists in Engro’s diverse investments ranging from technology, energy, PVC resins, chemical storage to trading and food and dairy business. With limited disclosure on these firms and their future prospects it is difficult to assign them a fair value, but moving forward with better coverage and listings of profitable ventures, better incorporation of value will be achieved. However, the dividend income has contributed at a CAGR of 52% between CY02-CY06.
Listings of Investments
In the upcoming years it is anticipated that Engro might be interested in listing its subsidiaries namingly, Engro Foods Limited (100% owned subsidiary) engaged in dairy milk production, Engro Energy (100% owned subsidiary) an IPP producing 220MW of power and Engro Asahi Chemical (JV with 80% ownership) for its expansion of PVC chemicals to 150,000 tons. Any activity on the primary market counter by these companies is to contribute towards balance sheet strength in the form of revaluation on investments and proceeds on account of share premium.
Feedstock not dollar hedged
Unlike previous gas policies set in Pak Rupee terms, the feedstock gas provided to Engro for its incremental urea capacity set at $0.7/MMBTU for 10 years after commencement of production is exposed to fluctuations in the PKR/US$ exchange rate. Any pressure on the Pak Rupee is likely to dent the firms margins.
Limited Growth potential from core business for CY07-CY10
Despite the recent hype about Engro’s urea expansion facility and future of Engro Foods and Engro Energy, there is a lag before the eggs are hatched. Engro’s urea facility is likely to generate cashflows in CY11. FCF proceeds in the form of dividends from Engro foods and Engro energy are likely to occur in CY11.
Reduction in Urea off-take
In order to bring price stability to the market, the GoP maintains an inventory buffer, any extraordinary build up in inventory levels is likely to decrease urea off-take and thus impact negatively towards Engro’s profitability.
Reduction in fertilizer prices Globally
Although the probability of such an event is rare with the World Bank signaling food inflation to be a major sign of concern in CY08, however, looming fears of global recession combined with declining commodity prices can dent fertilizer prices internationally, thus bringing down the price differential between domestic and international prices.
Increase in Interest Rates
Any upward movement in the interest rates is also likely to raise the cost of interest payment flows during the construction of the facility. Such a move would adversely affect the FCF after CY11 and thus increase the break-even period.
The parent company Engro has a number of completely owned and partially owned assets. Below is a graphical structure of the parent-subsidiary, parent-JV structure:
Engro Eximp EMSL
Employees Trust
Dawood Group (Parent Company)
Group Owned Companies
Strategic Investments
Central Insurance (Insurance)
Inbox Technologies(Hardware Solutions)
Dawood Hercules(Fertilizer)
Elixir Securities(Equity Broking)
Dawood Lawrencepur(Textiles)
Engro Chemicals(Fertilizers & Diversified
Investments)
Engro Foods(Dairy & Food)
Engro Energy(Power Producer)
Engro Mgmt(Modaraba)
Engro Eximp(Fertilizer Trading)
Engro VOPAK(Chemicals Storage)
Engro Asahi(PVC Resins)
Engro Innovative(ERP & Industrial Hardware)
100% Owned Subsidiaries
51% Stake
80% Ownership
50% JV
In order to gain better understanding of Engro’s diversified investments and its reflection on the stock’s price discovery mechanism, below is a synopsis on the JV’s, stakes and fully owned subsidiaries:
Engro Foods (EFL)
Engro Foods Limited (EFL) is a 100% owned subsidiary of Engro Chemicals Pakistan Limited which started production in March 2006 with a UHT milk processing plant in Sindh with an initial capacity of 200,000 liters per day. Pakistan remains one of the top five producers of milk, it is estimated that total production in the country exceeds 32 billion liters per annum of which only 4% is processed and packaged.
This most recent project by Engro Chemicals is in line with Pakistan’s agrarian backdrop coupled with higher disposable incomes and better living standards witnessed in the last five years. EFL’s high spending on promotional and marketing techniques although a dent on its bottom line in the short term will pay off in the longer run, has proved successful where it has increased its market share from 6% in May-06 to 15.8% in Dec-07.
The milk business is seen to have a wide array of derivatives such as cheese, flavored milk, butter, chocolates, cream and yogurts. From examples such as Nestle Pakistan and Haleeb Foods, it is learnt that once satisfactory levels for UHT milk are achieved, concentration into other value added products is the next logical step for EFL eventually increasing its chances of an early breakeven with prospects of potential domestic or international joint ventures in this lucrative business segment.
The demand for fertilizer continues to outstrip supply in Pakistan, the remainder has to be imported, Engro has been wise enough to take advantage of such an imbalance by establishing a 100% owned subsidiary that imports phosphate fertilizer from the international market and then resells it to Engro, Engro Chemicals further sells it into the market for a fractional margin, the opportunity cost is compensated from the proceeds of Engro Eximp in the form of dividends. Engro operates at full operational capacity and therefore any upsurge in demand is likely being met by imports which will be absorbed by this venture, churning dividends for Engro.
Engro Energy
Looking at the domestic energy crisis, Engro has partnered into an agreement in which Engro Energy a wholly owned subsidiary of Engro Chemicals will engage in the production of electricity. The plant will be set at an estimated cost of $250mn with the capacity to produce 220MW of electricity. The details regarding the plant’s fuel platform are still unclear, any development towards a multi-fueled power plant are likely to improve the IRR.
Engro Management Services Limited
EMSL is a wholly owned subsidiary of Engro Chemicals, this company is basically a Modaraba company, but since it has not been operational for the last three years its license has been withdrawn. According to annual reports the management is still thinking about the future prospect of EMSL.
Engro Vopak Terminal Limited (EVTL)
Engro Vopak Terminal is a 50:50 JV between Engro Chemical Pakistan Ltd and Dutch company Royal Vopak located at Port Qasim, Karachi which commenced operations in 1997. With an initial outlay of US$60mn the company specializes in handling and storage of bulk chemicals with a total capacity of 69000 cubic feet. EVTL boasts off a substantial market share of 77% in imported chemicals with storage of Acetic Acid, Liquified Petroleum Gas (LPG), Paraxylene and Vinyl Chloride Monomer (VCM).
EVTL is currently involved in the process of constructing an Ethylene storage facility at a cost of US$30mn. In a post expansion scenario higher volumes of storage will assist in generating better profitability, thus inflating the bottom line for Engro Chemicals.
Engro Asahi Chemical Ltd (EACL)
The initial capital structure of this venture was a 50:30:20 joint venture between Engro Chemicals, Asahi Glass Co. (Japan) and Mitsubishi Corp. In the last quarter of 2006, Engro Chemicals increased its shareholding in the company to 80% upon exit of Asahi Glass Co. The company is located near Port Qasim with a capacity of 100,000 tons per annum.
The company specializes in the production if PVC chemicals which are primarily used in the construction of canal lining and transmission of water. Recently PVC resin is also used in the construction of doors, windows, floors and other building materials as suitable alternatives. EACL currently operates at 100% capacity utilization, which is why the firm has decided to expand capacity by 50% to 150,000 tons p.a. at a total cost of $220mn.
A technological step forward, part of the overall diversification process in establishing itself as a conglomerate, Engro has also ventured into technology by acquiring a 51% stake in automation and control division of Innovative Private Limited, a firm creating hardware and software solutions for industries. EIAPL is a turnkey automation and engineering solutions vendor which also provides collaborated hardware solutions from its alliances around the world.
The company has seen an abnormal surge in profits by 390% YoY in CY06 primarily due to its acquisitions in the UAE in CY05. The company will continue to contribute double digit growth to Engro as the market for tailor made industrial solutions has grown at 50% globally in CY07 and locally with more manufacturing activity coupled with aggressive exploration licenses being sought in the oil and gas exploration sector.
Although a number of stocks have not replicated the performance of the benchmark index at the KSE, Engro remains one stock which has outperformed the KSE 100 index by 10% in CY07 and has certainly been the best pick in comparison to other fertilizer company’s. Well diversified investments into the food and energy business coupled with a limited float and increased foreign participation has helped in revaluing the stock.
The volume graph above illustrates the stock’s trading activity which has gradually shown an up-tick on the bank of increased investor awareness regarding the conglomerate nature of the firm and an ADT (3mnths) of 4.5mn shares attracting day traders and scalpers in turn addressing the liquidity concerns of the stock.
Engro’s PER(x) band
Judging from the graphical representation above it is visible that Engro invariably trades at premium to the benchmark KSE 100 index PER(x) of 11.8 for forward earnings. This phenomenon entails the markets better understanding about the investments held by the parent company and their future potential, the only company aggressively gearing towards the demand for the future which would boost its earnings by 80% within the timeframe of 3 years. Thus the higher the PVGO factor, the higher the PER(x).
Historically, inline with the other fertilizer companies, Engro chemicals has been a high distributor of its earnings. Over the last five years Engro has paid out 79% as dividends to its shareholders, however there was a 21% decline in CY06 mainly due to aggressive investments in its subsidiaries, however considering its future capacity expansion plans for another Urea facility, we estimate a likely drop to 65% in its dividend payments till CY11 as profit retention will be employed as a mechanism to generate funds.
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2005A 2006A 2007E 2008E 2009E 2010E 2011E
EPS DPS
Total Shareholder Return (TSR)
Source: SAAO Research & Engro Financials
TSR is a relatively easy methodology to trace an equity instruments performance over a given timeframe usually a year. The measure captures the total tangible return to investors by combining the cash dividend and the capital gains component over a year and dividing the sum by the share price at the beginning of the year. This technique is usually used by large cap multi asset funds to gage instruments with the highest absolute return as a percentage of the entire portfolio and its consequential impact on the Net Asset Value (NAV). This technique has gained tremendous respect at Wall Street over the last decade. Using Engro as a proxy, it is clearly evident that the firm has been able to generate phenomenol returns:
One of the main reasons for the initiation of this report is the $970mn expansion that Engro has undertaken which will eventually increase its market share, reduce the burden of imports on the exchequer and the growth in profitability likely to occur for Engro.
According to Engro’s analyst briefing on the subject the following important disclosures were made:
Urea Expansion Facility DetailsBelow are select few details of the urea expansion facility as presented by Engro’s management at a security analysts briefing in October, 2007:
Infrastructure Requirements
- Additional Land : 40 Acres of land- Incremental Housing : 180 Houses (Management.; 30, Non Management ; 150) - A New Workshop facility- Warehouse & Office Buildings Extensions would be required
Integrated Utilities & Offsite Facilities for the plant would include:
- Power : 20 MW- Steam : 140 Tons / Hr- Water Intake : 2,000 Cu meter / Hr
The plant would be an Ammonia / Urea Complex as follows:
- Ammonia Plant : 2,194 MTD based on Haldor Topsoe Technology- Urea Plant : World’s largest single train plant 3,835 MTD based on Snamprogetti TechnologyProduct Movement & Storage Facility would require:
- Bagging Capacity : 5,000 MT / Day- Loading Scheme : Combination of auto & manual bagging- Product Off take : 100% sold in domestic; augmented existing network
Source: SAAO Research & Engro Analyst briefings
Total Capital Expenditure $771 MillionContingencies @ 10% $ 76 MillionCapex excluding Interest during development $847 MillionInterest During Construction $113 MillionTotal Capital Expenditure to CY11 $970 Million
To fund this mega project, Engro has disclosed the following financial arrangements:
Equity Funding
A total of $220mn will be raised through exercising rights issue and profit retention between CY07 and CY10.
Debt
The debt component of the funding process will be segregated in two categories, local currency debt and foreign currency debt. Below is a list of debt facility, amount raised and tenor.
Although it remains a challenge in assigning a fair value to Engro as much of its investments are unlisted private companies for which limited information is available.
For simplistical reasons we have broken down our estimates into two components, the first component assigns a fair value to Engro Chemicals fertilizer business and the other component is a fair value of its long term diversified investments portfolio.
Using DCF methodology we have arrived at a fair value for Engro Chemicals fertilizer business at PKR265 based on current outstanding shares of 193.4mn. In determining this value we have used the following metrics:
Terminal Growth Rate: 4.0% (Historical growth of the fertilizer business)
WACC (Weighted Average Cost of Capital)
Cost of Equity : 16%Cost of Debt : 12.5%Effective Tax Rate : 25%Risk Free Rate : 10%Beta : 1.09 (Against KSE 100 over 5 years) WACC : 13.25%
In assigning a fair value to Engro Chemical’s other businesses we have used a number of techniques which includes, break-even analysis, Dividend discount model, P/E and P/BV methods. After assigning a fair value to a business, the next step was to ascertain Engro’s stake in that venture, then adjust the break-up value in contributing towards Engro.
We have arrived at a fair value of PKR74 for Engro’s other business.
Using a sum-of-the-parts (SOTP) method to determine a fair value for Engro Chemicals and its investments in JV’s and fully owned subsidiaries we have arrived at PKR339 as our target price for CY08.
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