PSO: ANOTHER GOOD RESULTS

Middles East crisis has impacted market but the most important aspect of market "Corporate Profitability" is still there. Once the issues get settled down in Middle East, market will show its strength again.

PSO, which occupies the largest share of "Oil Marketing Sector" has posted its result. Profit is PKR 7.13 billion (EPS: 41.58) as compared to PKR 5.08 billion (EPS: 29.64) over the corresponding period last year, which translates into an improvement of 40% however, this includes a one time reversal of turnover tax which GoP reduced from 1% to 0.5%, the impact of this reversal is around PKR 23.46/share which means if we deduct this reversal then EPS becomes PKR 18.12. But the result is exactly as per expectations and this is what counts. The company also announced an interim dividend of PKR 5 as well. Full year EPS is expected to be PKR 71 with accumulated dividend of PKR 10.

The good news is despite the healthy results the stock of PSO is sliding downwards because of overall market correction as discussed above. The relevant data is as follows:

Current Price = 268

Target Price = 340-350

P/E = 3.77 (if you include one time tax reversal then P/E = 5.6)

Dividend Yield = 3.73%

Total Expected Return = 27% + 3.7% = 31%

KAPCO has posted its results for 1H 2011. The resutls are exactly as per expectations but before proceeding to results just see what I posted on Jan 10, 2011.

"The company pays out all what it earns, however due to circular debt issue, it is not expected to continue this 100% payout for the next year but still the payout is expected to be much better than most of the stocks in KSE 100. Its next year expected EPS is 7.5 - 8, and dividend is expected to be PKR 5.5 - 6 which means payout of around 75%. The current price of share is around PKR 44 and the target price is expected to be PKR 52, so the P/E of share is 5.9 (market has a P/E of around 8), dividend yield is around 12.5% and an upside of 20%. I think it is a good share to buy right now."

As per the result, company earned PKR 3.85 billion (EPS: 4.37) as compared to PKR 2.72 billion (EPS: 3.09) over the same period last year. The results improved by 61%, but this improvement was expected as can be seen above that full year expectation of EPS is 7.5-8 and after the half yearly results, we can see that company can achieve these expectations. However, there is a good news about dividend as well as company announced an interim divident of PKR 3 which means pay out of 69% not bad given the fact that company is having exposure to circular debt issue. There is one more good news, company's share is still trading at around PKR 42 so what you need to do is grab this share as soon as possible. The relevant data is as follows:

Target Price = 52

Current Price = 42

P/E = 5.25

Divident Yield = 14%

Total expected return = 23.8%+14% = 38%

DGKC: POOR RESULTS BUT NOT A BAD COMPANY

There are just four profitable cement companies in KSE, namely:

1) Lucky Cement

2) Attock Cement

3) Dera Ghazi Khan Cement (DGKC)

4) Fauji Cement

Today, I am briefly discussing DGKC. It has posted its result for 1H 2010 and earned PKR 192 million (EPS: 0.52) which is 59% lower than last year earnings of PKR 470 million (EPS: 1.29). The results are below expectations and its share is now showing a declining trend as you can see in graph.

However, we need to keep in mind that increase in fuel cost, winter season and floods have deteriorated the earnings of cement sector. As we all know coal prices are now getting stable, we are now at the end of winter season, and reconstruction activities in flood affected area have started. All of these things showing a positive and improved performance in 2H 2010, therefore I would advice all my readers to accumulate position in DGKC.

Company has also announced 20% right shares at PKR 20. Most of the analyst are not that bearish about this stock in the long term and current bearish trend is just an opportunity to grab this stock at lower levels. However, the stock might go even further down so investor should accumulate the position gradually. Research houses are giving a target price of around 32-46 so minimum return of 25% is possible from current level of PKR 24.

RAYMOND DAVIS ISSUE: COULD BE DANGEROUS FOR MARKET

Even though I consider myself a fundamental investor and usually don't get into panic or confusion on small political issues but I think the issue of Raymond Davis is not that "small". Pakistani Government is facing a dilemma, if they let go Raymond then they have the face the strong demonstrations and protests from opposition parties especially religious parties. Media off course will take the side of opposition as well and if they do not let go Raymond then their relationship with their biggest donor (who are also supporting stock market since they are leading the market for six months or so) might go to jeopardy. I guess the implications of any decision of government are very uncertain but unpleasant for sure. On a long term basis, satisfying America either through a release of Raymond or convincing them to face the court might be a better option. I think it will not be possible for market to appreciate under these conditions so investors should invest with caution at this moment.

ENGRO: RESULTS FAR BETTER THAN EXPECTATIONS

ENGRO has announced its results for FY 2010; the company earned PKR 6.79 billions which is 78.36% higher than the earnings of previous year. EPS for 2010 is PKR 20.72 as compared to last year of just PKR 12.24. Company also announced a final dividend of PKR 2 which translates into a total accumulated dividend for the year 2010 of PKR 6. Company also announced 20% bonus shares as well.

As I posted earlier that company was expected to post an EPS of PKR 18 but company managed to post 20% more than expectations plus company also announced surprise bonus shares as well. The company is expected to perform well; some research houses are quoting a target price of PKR 280, which means an appreciation of around 30% is possible from current level of PKR 216.

LUCKY CEMENT: ANNOUNCES RESULTS AS PER EXPECTATIONS

Lucky Cement (LUCK), my most favourite company in cement sector has posted it's result for 1H 2011. The company made an after tax profit (PAT) of PKR 1461 million and an EPS of PKR 4.52 as compared to last year EPS of 5.90 for the same period which means earnings have declined by 23%, however, this decline was already expected in market as we all know dispatches have been affected very badly because of floods. Situation at the export front is not that worrisome right now. Prices of cement are not showing any declining trend which is also a good thing for cement sector. Rising coal prices are a major threat to cement sector and one needs to keep a close eye on it.

The company is expected to post an EPS of PKR 11 and dividend of PKR 5 for full year 2011. With the current price of PKR 70, company is trading at an attractive P/E of 6.4 and dividend yield of 7% is also not that bad. The target price of Lucky Cement is quoted at around PKR 85 which means capital gain of 21% is possible. Total expected return amounts to 7%+21%= 28%. I regard it as a least risky and the most attractive scrip in cement sector right now.

ATTOCK PETROLEUM: AS PER EXPECTATIONS RESULTS

Attock Petroluem probably the strongest company in the Oil & Marketing sector right now has posted its half yearly results ended on Dec 31, 2010. The PAT is 1.743 billion which translates into EPS of 25.22 which is 17% higher than EPS of 21.55 posted last year for the same period. The company also announced an interim dividend of PKR 11.5.

The company is expected to post an EPS of PKR 50 for full year with accumlated dividend of PKR 30. Considering the fact that APL is trading at PKR 380, it's P/E is 7.6 with impressive dividend yield of 7.9%. The target price of company is quoted at around PKR 420 which means capital gain of 10.5% is possible from current levels. Total return that could be achieved is 7.5% + 10.5% = 18%. I believe it's a good stock to buy and as you can see in the graph company has been doing good for the last 30 days and currently due to the correction is sliding downward which is a good opportunity to grab this strong scrip.