Despite a peaceful end to the 21 day long sit-in that resulted in the Law Minister’s resigna-tion, the market continued to reel under pressure, breaching 40k psychological bearer for
the third time since Oct’17 but managed to close at 40,010pts (down 0.59%WoW, 238pts). Apart from challenges on the political front, investors chose to remain on the sidelines
ahead of the MSCI rebalancing on Nov 30’17 with foreigners offloading US$39.54mn worth
of equities during the week vs. net outflow of US$6.28mn in the previous week. That said, positive newsflow on the macro front (successful Eurobond/Sukuk issuance in the global
market) led to some recovery towards the end of the week. Average daily trading volumes recovered to 129.91mn shares (+20.98%WoW) with volumes leaders including: 1) KEL
(90.60mn shares), 2) TRG (62.15mn shares), 3) ENGRO (34.46mn shares), 4) ANL (25.51mn shares) and 5) SNGP (19.19mn shares). Key news flows impacting the market during the
week included: 1) GoP raising US$2.5bn through issuance of 5-yr sukuk and 10-yr euro
bond, where cut off yields were 5.625% and 6.875%, respectively, 2) Supreme Court started hearing NAB’s appeal regarding re-opening of the Hudaibiya Paper Mills case, 3) fertilizer off
-take remaining strong as Rabi season kicked in, with Oct’17 urea/DAP clocking in at 375k/387k tons (+4%YoY/-19%YoY), 4) ECC approving additional sugar export quota of 1mn
tons with a subsidy of PkR10.70/kg, 5) OGRA proposing a revised tariff for gas utilities where it seeks to apply the WACC based return on T&D networks (at 10.76/11.31% of their net
regulated assets) instead of fixed ROA based returns previously. Performance wise, scrips
leading the bourse were: 1) KEL (+5.16%WoW), 2) UBL (5.06%WoW), 3) ENGRO (3.39%WoW), 4) NBP (+2.82%) and 5) MCB (+1.75%WoW), while laggards included 1) PSMC (-5.8%
Important disclosures including investment banking relationships and analyst certification at end of this report. AKD Securities does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.
We expect market sentiments to improve going forward as the political uncertainty subsides following the end of ‘Dharna’ episode. The outcome of OPEC’s meet remains a key check-point for the market with the market participants widely anticipating an extension of the current arrangement. Also of key importance will be KEL’s tariff review hearing by NEPRA scheduled on Dec 05’17.
30 November 2017
Outlook
Index & Volume Chart
Source: PSX & AKD Research
Universe Gainers & Losers
40,032
39,634 39,673
40,010
39,400
39,500
39,600
39,700
39,800
39,900
40,000
40,100
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
27-Nov 28-Nov 29-Nov 30-Nov
(Index)(Shrs'000)
Ready Volume (LHS) KSE100 Index (RHS)
Indices KSE-100 KSE-30
This w eek 40,010 20,109
Last w eek 40,248 20,330
Change -0.59% -1.09%
Indices KMI-30 Allshare
This w eek 68,096 29,113
Last w eek 69,355 29,011
Change -1.82% 0.35%
Mkt Cap. PkRbn US$bn
This w eek 8,375 79.41
Last w eek 8,356 79.20
Change 0.23% 0.26%
Avg. Daily Turnover ('mn shares)
This w eek 129.91
Last w eek 107.39
Change 20.98%
Top-5 Volume Leaders
Symbol Volume (mn)
KEL : 90.60
TRG : 62.15
ENGRO : 34.46
ANL : 25.51
SNGP : 19.19
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
KEL
UBL
ENG
RO NBP
MCB PP
L
CHCC
KAPC
O
HAS
COL
PSM
C
33,000
35,000
37,000
39,000
41,000
43,000
45,000
47,000
49,000
51,000
53,000
-50
50
150
250
350
450
550
650
750
850
950
No
v-1
6
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jul-1
7
Au
g-17
Sep
-17
Oct
-17
No
v-1
7
(Index)(share mn)
Volume (LHS) KSE-100 Index
Source: PSX & AKD Research
AKD Securities Limited
30 November 2017
StockSmart
Pakistan Weekly Update
This Week’s Daily Reports
2
Nov 29, 2017
OPEC meet: Consensus remains the key, (AKD Daily, Nov 30, 2017)
Geopolitical factors and country specific dynamics are set to dominate the talks during OPEC's 173rd ordinary meeting and the 3rd OPEC and non-OPEC Ministerial meeting on Nov30'17. A host of political factors seem to be at work this time around, with an apparent build-up of political alliances within the Middle East in help with the world's super powers. To this end, KSA and UAE stand on the same page, constituting ~12.9mbpd (39.5%) of OPEC's total output as of 3QCY17 while Iran's close alliance with Russia along with the sup-port of Qatar and Iraq (cumulative output of ~19.2mbpd) form the opposing block. While the internal rifts have grown in strength, we feel the following factors: 1) recent shift in trade dynamics with US exports targeting the supply gaps from OPEC, 2) the not-so-good economic conditions of KSA and Russia make a more compelling case for the group to push for a further extension. In addition to, the high compliance levels post the agreed cuts last year, despite rising tensions between Iran and KSA, further validates our viewpoint. While an extension can possibly spark a rally in oil prices, we believe it to be short-lived, thus maintaining our oil price assumption of US$55/bbl for FY19 and beyond. We also highlight that higher intl. oil prices in 1HFY18 can amplify earnings for POL, however the lagged im-pact of gas prices can give a boost to PPL and OGDC in 2HFY18.
NML: Emerging risks call for revision, (AKD Daily, Nov 29, 2017)
Incorporating recent developments (FO based plants closure, rising coal prices) leading to decline in portfolio value and weakening of core textile margins, we revisit our investment case on NML, revising down our SOTP based TP to PkR163.1/sh (previously at PkR185.3/sh). With regards to former, NML's listed portfolio value declined 17.8% FYTD, where power sector portfolio companies have seen 9%FYTD correction on the closure of FO based plants while its key strategic investment in the cement sector witnessed sharp 34% decline on ac-count of rising coal prices (+13.4%FYTD) amid pricing concerns. Also, rising input costs (energy & labor) has further put pressure on overall textile margins (2ppts decline in GM in 1QFY18). Citing no significant improvement during the year, we revise down our gross mar-gin expectations by 1ppt to 12.8%, consequently bringing down our FY18/FY19F earnings estimate to PkR14.88/17.03/share (down 9%/7%). While fundamental pressures remain, we feel particular attention should be given to developments on the company's auto venture, in partnership with Hyundai motors that can possibly catalyze price performance.
Pakistan Fertilizers: Sector update Oct'17, (AKD Daily, Nov 28, 2017)
According to the latest figures released by NFDC, total fertilizer sales in Oct'17 stood at 916k tons against 942k tons sold in Oct'16 (+45%MoM/-3%YoY), mainly due to higher Urea sales of 375k tons during the month (up 2.1xMoM/+4%YoY) on account of high demand Rabi season. DAP offtake on the other hand remained on the lower side, sliding by 19%YoY to 387k ton in Sept'17 on account of higher sales in the previous months. On the export front, companies were able to export another 108k tons of Urea in Oct'17, taking total Urea ex-port offtake to 530k tons against the allocated quota of 600k tons. On a cumulative basis, total fertilizer sales posted encouraging growth of 21%YoY to 7.58mn tons during 10MCY17 where urea offtake posted a decent growth of 18%YoY to stand at 4.52mn tons. Near-term checkpoints for the fertilizer industry remain in the form of: 1) ongoing Rabi season to con-tinue driving demand, 2) international pricing dynamics (urea prices rebounded to US$282/ton, up 48% since low of US$190/ton in Jul'17), and 3) normalization of inventory level (urea inventory standing at 690k tons vs. 1.70mn tons in Oct'16). Maintaining our Marketweight stance on the sector, FATIMA (TP of PkR45.1/sh) remains our top pick with its diversified product mix, continuous improvement in market share and concessionary gas pricing.
EFOODS: And the struggle continues, (AKD Daily, Nov 27, 2017)
GEFOODS 3QCY17 results were surprising with the company posting profit of PkR200mn, recovering from a loss of PkR145mn in 2QCY17. This sequential improvement was reflective of: 1) 92bps uptick in GM on account of the price increment made in Jun'17 (PkR10/ltr in-crease for Olpers) alongwith seasonal high margin ice-cream sales and 2) discipline on the expense side (distribution costs were down 26%QoQ). That said, fundamental outlook oth-
Source: PSX & AKD Research
Nov 28, 2017
Nov 30, 2017
Nov 27, 2017
39,600
39,650
39,700
39,750
39,800
39,850
39,900
39,950
40,000
40,050
40,100
9:3
0
9:5
8
10:2
7
10:5
5
11:2
4
11:5
2
12:2
0
12:4
9
13:1
7
13:4
5
14:1
4
14:4
2
15:1
1
39,400
39,450
39,500
39,550
39,600
39,650
39,700
39,750
39,800
9:3
0
9:5
3
10:1
7
10:4
0
11:0
4
11:2
8
11:5
1
12:1
5
12:3
8
13:0
2
13:2
5
13:4
9
14:1
2
14:3
6
15:0
0
15:2
4
39,900
39,950
40,000
40,050
40,100
40,150
9:3
0
9:5
5
10:1
9
10:4
4
11:0
9
11:3
4
11:5
8
12:2
3
12:4
8
13:1
2
13:3
7
14:0
2
14:2
7
14:5
1
15:1
6
39,500
39,600
39,700
39,800
39,900
40,000
40,100
40,200
9:3
0
9:5
5
10:1
9
10:4
4
11:0
9
11:3
4
11:5
9
12:2
3
12:4
8
13:1
3
13:3
8
14:0
2
14:2
7
14:5
2
15:1
7
AKD Securities Limited
30 November 2017
StockSmart
Pakistan Weekly Update
This Week’s Daily Reports
3
erwise remains bleak as the company continues to struggle on multiple key fronts (persistent revenue shrinkage and increasing cost side pressures). To this end, continuously rising international milk powder prices (+30%YoY in 10MCY17), stiffening up of competition (both in the whole milk and tea whitener space) amid increasing price differential between packaged and loose milk can continue exerting pressure. As a result, we expect the compa-ny to round off CY17F earnings at PkR573mn (EPS: PkR0.79) against PkR2.3bn (EPS: PkR3.12) in CY16. While operating environment remains challenging, product initiations under the new management remain the only bright spot, however nothing in this regard has been put forward yet. At current price level, the stock trades at unjustifiably high multiples (forward PE/PS at 68.2x/1.72x) vindicating our Reduce stance.
AKD Securities Limited
30 November 2017
StockSmart
Pakistan Weekly Update
4
Commodities
International Major Currencies
Source: Bloomberg
Source: Bloomberg
Major World Indices’ Performance
Source: Bloomberg
TRJ-CRB Index
Source: Bloomberg
PkR/US$ Trend
Source: Bloomberg
Regional Valuations (2017)
Source: Bloomberg & AKD Universe
165
168
171
174
177
180
183
186
189
192
195
198
Nov-
16
Dec-
16
Jan-1
7
Feb
-17
Mar-
17
Apr-
17
May-
17
Jun-1
7
Jul-17
Aug-1
7
Sep-1
7
Oct-17
Nov-
17
104.0
104.5
105.0
105.5
106.0
106.5
107.0
Nov-
16
Dec-
16
Jan-1
7
Feb
-17
Mar-
17
Apr-
17
May-
17
Jun-1
7
Jul-17
Aug-1
7
Sep-1
7
Oct-17
Nov-
17
SPOT Units 30-Nov-17 24-Nov-17 WoW CYTD
TRJ-CRB Points 190.9047 192.2154 -0.68% -0.83%
Nymex (WTI) US$/bbl. 57.83 58.95 -1.90% 7.65%
ICE Brent US$/bbl. 63.34 63.48 -0.22% 14.31%
N. Gas Henry Hub US$/Mmbtu 3.09 2.8 10.36% 10.75%
Cotton USd/Pound 82.45 81.6 1.04% 3.84%
Gold US$/Tr.Oz 1281.19 1288.8 -0.59% 11.19%
Sliver US$/Tr.Oz 16.5162 17.0776 -3.29% 3.76%
Copper US$/MT 6730.75 6980 -3.57% 21.87%
Platinum US$/Oz 945.09 942.53 0.27% 4.60%
Coal US$/MT 94.75 91.45 3.61% 13.13%
SPOT 30-Nov-17 24-Nov-17 Chg +/- WoW CYTD
Dollar Index 93.370 92.782 0.588 0.63% -9.07%
USD/PkR 105.440 105.475 -0.035 -0.03% 0.59%
USD/JPY 112.330 111.530 0.800 0.72% -3.61%
EUR/USD 1.184 1.193 -0.010 -0.82% 12.82%
GBP/USD 1.346 1.334 0.012 0.89% 9.75%
AUD/USD 0.757 0.762 -0.005 -0.66% 4.82%
NZD/USD 0.685 0.688 -0.003 -0.42% -1.69%
CHF/USD 0.986 0.980 0.007 0.69% -3.59%
CAD/USD 1.289 1.271 0.018 1.41% -4.53%
USD/KRW 1,088 1,085 2.750 0.25% -9.92%
CNY/USD 6.615 6.602 0.013 0.19% -4.91%
Country Bloomberg Code 30-Nov-17 24-Nov-17 WoW CYTD
Pakistan KSE100 Index 40,010 40,248 -0.59% -16.3%
Srilanka CSEALL Index 6,412 6,414 -0.03% 2.9%
Thailand SET Index 1,697 1,696 0.09% 10.0%
Indonesia JCI Index 5,952 6,067 -1.90% 12.4%
Malaysia FBMKLCI Index 1,718 1,717 0.04% 4.6%
Philippines PCOMP Index 8,254 8,365 -1.33% 20.7%
Vietnam VNINDEX Index 950 936 1.53% 42.9%
Hong Kong HSI Index 29,177 29,866 -2.31% 32.6%
Singapore FSSTI Index 3,434 3,442 -0.25% 19.2%
Brazil IBX Index 30,051 30,657 -1.98% 21.2%
Russia RTSSTD Index 13,753 14,024 -1.93% -6.7%
India SENSEX Index 33,149 33,679 -1.57% 24.5%
S&P SPX Index 2,626 2,602 0.91% 17.3%
DJIA INDU Index 23,941 23,558 1.62% 21.1%
UK UKX Index 7,409 7,410 -0.01% 3.7%
Germany DAX Index 13,173 13,060 0.87% 14.7%
Qatar DSM Index 7,714 7,742 -0.36% -26.1%
Abu Dhabi ADSMI Index 4,283 4,287 -0.09% -5.8%
Dubai DFMGI Index 3,421 3,461 -1.15% -3.1%
Kuwait KWSEIDX Index 6,197 6,239 -0.69% 7.8%
Oman MSM30 Index 5,110 5,086 0.46% -11.6%
Saudi Arabia SASEIDX Index 6,991 6,878 1.64% -3.0%
MSCI EM MXEF Index 1,141 1,154 -1.12% 32.4%
MSCI FM MXFM Index 619 617 0.24% 23.9%
EPS Growth PE(x)
Pakistan 18% 7.65
Indonesia 12% 15.23
Malaysia 13% 15.47
Philippines 7% 15.25
Vitenam 12% 17.96
India 28% 16.92
China 13% 12.93
% ROE Divd Yld
Pakistan 15.7% 6.94
Indonesia 15.08 2.39
Malaysia 10.14 3.50
Philippines 12.16 1.58
Vitenam 16.08 1.95
India 15.41 1.58
China 11.49 2.20
5
AKD Securities Limited
30 November 2017
StockSmart
Pakistan Weekly Update
Chart Bank
FIPI Flows for the week
Advance to Decline Ratio
AKD Universe vs. KSE-100 Index
LIPI Flows for the week
Earnings Yield vs. T-Bill (12M) Differential
KSE-100 vs. MSCI-EM & MSCI-FM
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
No
v-16
Dec
-16
Jan-
17
Feb
-17
Mar
-17
Ap
r-17
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
No
v-17
KSE100 MSCI EM
MSCI FM
(3,181)(3,893)
(12,587)
(19,884)
(23,000)
(18,000)
(13,000)
(8,000)
(3,000)
2,000
27-Nov-17 28-Nov-17 29-Nov-17 30-Nov-17
(US$'000)
-2.30
-1.80
-1.30
-0.80
-0.30
0.20
0.70
No
v-16
Dec
-16
Jan-
17
Feb
-17
Mar
-17
Ap
r-17
May
-17
Jun
-17
Jul-
17
Au
g-17
Sep
-17
Oct
-17
No
v-17
No
v-17
(%)
Ind., 8.61
Co., 7.30
Bank/DFI, 3.15
NBFC, 0.22
M.Funds, 4.38
Ins, 8.53
Others, 4.27
Prop. Trading , 3.08
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
Nov-1
6
Dec-1
6
Dec-1
6
Jan-1
7
Feb
-17
Ma
r-1
7
Ma
r-1
7
Apr-
17
Ma
y-17
Ma
y-17
Jun-1
7
Jul-1
7
Jul-1
7
Aug-1
7
Sep-1
7
Sep-1
7
Oct
-17
Nov-1
7
-17%
-12%
-7%
-2%
3%
8%
13%
18%
23%
No
v-1
6
De
c-1
6
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Oct
-17
No
v-1
7
KSE-All Share Index AKD Universe
6
AKD Securities Limited StockSmart
Pakistan Weekly Update
Market PER Chart 2017
Source: AKD Research
Market P/BVS Chart 2017
Source: AKD Research
30 November 2017
Jul-0
7
May
-08
Mar
-09
Feb-
10
Dec
-10
Oct
-11
Sep-
12
Jul-1
3
May
-14
Apr
-15
Feb-
16
Dec
-16
Nov
-17
14.0
10.5
7.0
3.5
(x)
Jul-0
7
May
-08
Mar
-09
Feb-
10
Dec-
10
Oct
-11
Sep-
12
Jul-1
3
May
-14
Apr-
15
Feb-
16
Dec-
16
Nov
-17
2.5
2.0
1.5
1.0
(x)
7
AKD Securities Limited StockSmart
Pakistan Weekly Update
AKD Universe Active Coverage Cluster’s Valuations
30 November 2017
Source: AKD Research UR Under Review
Stock Symbol Price TP Stance EPS(PkR) PE(x) PB(x) DY(%)
This publication/communication or any portion hereof may not be reprinted, sold or redistributed without the written consent of AKD Securities Limited. AKD Securities Limited has produced this report for private circulation to professional and institutional clients only. The information, opinions and estimates herein are not directed at, or intended for distribution to or use by, any person or entity in any jurisdiction where doing so would be contrary to law or regulation or which would subject AKD Securities Limited to any additional registration or licensing requirement within such jurisdiction. The information and statistical data herein have been obtained from sources we believe to be reliable and complied by our research department in good faith. Such information has not been independently verified and we make no representation or warranty as to its accuracy, completeness or correctness. Any opinions or estimates herein reflect the judgment of AKD Securities Limited at the date of this publication/ communication and are subject to change at any time without notice.
This report is not a solicitation or any offer to buy or sell any of the securities mentioned herein. It is for information purposes only and is not intended to provide professional, investment or any other type of advice or recommendation and does not take into account the particular invest-ment objectives, financial situation or needs of individual recipients. Before acting on any information in this publication/communication, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice. Neither AKD Securities Limited nor any of its affiliates or any other person connected with the company accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained therein.
Subject to any applicable laws and regulations, AKD Securities Limited, its affiliates or group companies or individuals connected with AKD Securities Limited may have used the information contained herein before publication and may have positions in, may from time to time pur-chase or sell or have a material interest in any of the securities mentioned or related securities or may currently or in future have or have had a relationship with, or may provide or have provided investment banking, capital markets and/or other services to, the entities referred to herein, their advisors and/or any other connected parties.
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This document is being distributed in the United State solely to "major institutional investors" as defined in Rule 15a-6 under the U.S. Securities Exchange Act of 1934, and may not be furnished to any other person in the United States. Each U.S. person that receives this document by its acceptance hereof represents and agrees that it: is a "major institutional investor", as so defined; and understands the whole document. Any such person wishing to follow-up any of the information should do so by contacting a registered representative of AKD Securities Limited.
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Analyst Certification We, the AKD Research Team, hereby individually & jointly certify that the views expressed in this research report accurately reflect our personal views about the subject securities and issuers. We also certify that no part of our compensation was, is,or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. We further certify that we do not have any beneficial holding of the specific securities that we have recommendations on in this report.
AKD Research Team
Analyst Tel no. E-mail Coverage
Umer Pervez +92 111 253 111 (693) [email protected] Executive Director Research & Business Development
