Daily Research Report Karachi Stock Exchange
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Neutron
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Bullish Momentum Continues Amid Overbought Readings
Short‐Term: Market successfully attained 33,818 level last week with the 14-day RSI (78.05) approaching bull market momentum resistance between 80 — 90 readings . Additional strength would perpetuate bullishness towards 34,320 level. On the downside, a relapse below 33,629 level would call for minor correction towards 33,562 and 33,344 levels. Lock profits on strength in cements, hold banks while accumulating oil, fertilizer, textile and insurance sectors on dips.
13-day Leaders: SHFA, DAWH, KTML, PCAL, NESTLE, JSCL, NETSOL, CEPB, PKGP & AHCL
13-day Laggards: JDWS, FML, JLICL, ATLH, PKGS, NPL, NCPL, KOHE, PAKT & BOP
Short‐Term: Market successfully attained 33,818 level last week with the 14-day RSI (78.05) approaching bull market momentum resistance between 80 — 90 readings . Additional strength would perpetuate bullishness towards 34,320 level. On the downside, a relapse below 33,629 level would call for minor correction towards 33,562 and 33,344 levels. Lock profits on strength in cements, hold banks while accumulating oil, fertilizer, textile and insurance sectors on dips.
13-day Leaders: SHFA, DAWH, KTML, PCAL, NESTLE, JSCL, NETSOL, CEPB, PKGP & AHCL
13-day Laggards: JDWS, FML, JLICL, ATLH, PKGS, NPL, NCPL, KOHE, PAKT & BOP
Neutron
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surplus can become a trend
The Current Account balance for Dec'14 registered a minor surplus of US$76mn compared to a CA deficit of US$568mn (0.24% of GDP) in Nov'14. The surplus for the month came on the back of 1) continued rise in remittances depicting a 19.8%MoM jump (US$1.58bn in Dec'14 vs. US$1.32bn in Nov'14), 2) improvement in the Trade Deficit, which stood at US$1.09bn, an improvement of 10.7%MoM/13.8%YoY due to an uptick in export figures which at US$2.29bn, rose by 22.7%MoM. Food and Textile sector outshined among exports with Food registering growth of 17%MoM at US$470mn, while Textile exports were up 27%MoM at US$1.22bn. However, for 1HFY15, the CA deficit rose to US$2.36bn from US$2.00bn in 1HFY14, but remained stable as a percentage of GDP at 0.98%. The deficit widened for the first half due to a 2%YoY slump in exports during 1HFY15. We expect the CA to maintain the positive trend witnessed in Dec'14 due to an escalation in worker's remittances and relative ease on the import bill as oil prices struggle to find a bottom. Pakistan's currency which has been stable so far (an appreciation of 4% versus the US$ in CY14) is likely to consolidate at current levels as well since foreign reserves remain at comfortable levels (as of 9th Jan'15: US$15.1bn). .
CA posted a surplus of US$76mn in Dec'14: Pakistan's BoP position for Dec'14 ended with a positive surprise as the Current Account clocked in a minor US$76mn surplus compared to a CA deficit (revised) of US$568mn (0.24% of GDP) in Nov'14. The turnaround came on the back of 1) continued rise in remittances with a 19.8%MoM jump (US$1.58bn in Dec'14 vs. US$1.32bn in Nov'14) 2) a 22%MoM increase in exports (maintained by an increase in the heavyweight Textile and Food sectors). However, in comparison to Dec'13, CA slightly decreased from a surplus of $285mn. Consequently, the CA balance for 1HFY15 rounded off with a deficit of $2.36bn, which was higher than deficit of $2.00bn in 1HFY14, but remained stable as a percentage of GDP at 0.98%. The deficit widened for the first half due to a 2%YoY slump in exports during 1HFY15. Workers remittances remained strong, reaching US$8.9bn for 1HFY15, a rise of 15.3%YoY. .
An Improving Trade Deficit: Trade Deficit for the month of Dec'14 stood at US$1.09bn, improving by 10.7%MoM/13.8%YoY on the back of a rise in export figures. Exports for the month of Dec'14, came in at US$2.29bn, up by 22.7%MoM. Impetus from 1) the Textile sector, which showed an increase of 27%MoM at US$1.22bn and 2) the Food group which registered a growth of 17%MoM at US$470mn. Imports for the month at US$3.38bn also saw a rise of 9.5%MoM, while a slump of 5%YoY from Dec'13.
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Textile - The Winner: Textile exports comprised of ~53% to the total exports during Dec'14, exhibiting a growth of 4.4%YoY. On a monthly basis, enhancement in the exporting numbers of both the spinning and value added segments fueled the 27%MoM increment, where hike in the demand on the heels of Christmas and low base stood as the major triggers. Segment-wise, growth in textile exports was led by the value added segment (28%MoM) followed by (24%MoM) growth in the spinning sector. .
Outlook: Pakistan's CA balance, along with the BoP position can be expected to sustain the positive trend going forward with continued expansion in worker's remittances accompanied by relative easing of the import bill as oil prices plunge, struggling to find a bottom. Pakistan's currency which has exhibited relative stability so far (an appreciation of 4% versus the US$ in CY14) is likely to consolidate at current levels as foreign reserves remain at comfortable levels (as of 9 Jan'15: US$15.1bn). The latter can convince SBP to be aggressive in the next MPS (consensus call for a 50bps-100bps DR cut).
The Current Account balance for Dec'14 registered a minor surplus of US$76mn compared to a CA deficit of US$568mn (0.24% of GDP) in Nov'14. The surplus for the month came on the back of 1) continued rise in remittances depicting a 19.8%MoM jump (US$1.58bn in Dec'14 vs. US$1.32bn in Nov'14), 2) improvement in the Trade Deficit, which stood at US$1.09bn, an improvement of 10.7%MoM/13.8%YoY due to an uptick in export figures which at US$2.29bn, rose by 22.7%MoM. Food and Textile sector outshined among exports with Food registering growth of 17%MoM at US$470mn, while Textile exports were up 27%MoM at US$1.22bn. However, for 1HFY15, the CA deficit rose to US$2.36bn from US$2.00bn in 1HFY14, but remained stable as a percentage of GDP at 0.98%. The deficit widened for the first half due to a 2%YoY slump in exports during 1HFY15. We expect the CA to maintain the positive trend witnessed in Dec'14 due to an escalation in worker's remittances and relative ease on the import bill as oil prices struggle to find a bottom. Pakistan's currency which has been stable so far (an appreciation of 4% versus the US$ in CY14) is likely to consolidate at current levels as well since foreign reserves remain at comfortable levels (as of 9th Jan'15: US$15.1bn). .
CA posted a surplus of US$76mn in Dec'14: Pakistan's BoP position for Dec'14 ended with a positive surprise as the Current Account clocked in a minor US$76mn surplus compared to a CA deficit (revised) of US$568mn (0.24% of GDP) in Nov'14. The turnaround came on the back of 1) continued rise in remittances with a 19.8%MoM jump (US$1.58bn in Dec'14 vs. US$1.32bn in Nov'14) 2) a 22%MoM increase in exports (maintained by an increase in the heavyweight Textile and Food sectors). However, in comparison to Dec'13, CA slightly decreased from a surplus of $285mn. Consequently, the CA balance for 1HFY15 rounded off with a deficit of $2.36bn, which was higher than deficit of $2.00bn in 1HFY14, but remained stable as a percentage of GDP at 0.98%. The deficit widened for the first half due to a 2%YoY slump in exports during 1HFY15. Workers remittances remained strong, reaching US$8.9bn for 1HFY15, a rise of 15.3%YoY. .
An Improving Trade Deficit: Trade Deficit for the month of Dec'14 stood at US$1.09bn, improving by 10.7%MoM/13.8%YoY on the back of a rise in export figures. Exports for the month of Dec'14, came in at US$2.29bn, up by 22.7%MoM. Impetus from 1) the Textile sector, which showed an increase of 27%MoM at US$1.22bn and 2) the Food group which registered a growth of 17%MoM at US$470mn. Imports for the month at US$3.38bn also saw a rise of 9.5%MoM, while a slump of 5%YoY from Dec'13.
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Textile - The Winner: Textile exports comprised of ~53% to the total exports during Dec'14, exhibiting a growth of 4.4%YoY. On a monthly basis, enhancement in the exporting numbers of both the spinning and value added segments fueled the 27%MoM increment, where hike in the demand on the heels of Christmas and low base stood as the major triggers. Segment-wise, growth in textile exports was led by the value added segment (28%MoM) followed by (24%MoM) growth in the spinning sector. .
Outlook: Pakistan's CA balance, along with the BoP position can be expected to sustain the positive trend going forward with continued expansion in worker's remittances accompanied by relative easing of the import bill as oil prices plunge, struggling to find a bottom. Pakistan's currency which has exhibited relative stability so far (an appreciation of 4% versus the US$ in CY14) is likely to consolidate at current levels as foreign reserves remain at comfortable levels (as of 9 Jan'15: US$15.1bn). The latter can convince SBP to be aggressive in the next MPS (consensus call for a 50bps-100bps DR cut).
WishLivePak
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What is your education background?
Not to offend you.
Not to offend you.
Neutron
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Why you want to know my education background? :p
Neutron
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to initiate the growth story?
EFOODS is scheduled to announce its CY14 results on 26 Jan'15. In this regard, we expect the company to post NPAT of PkR612mn (EPS: PkR 0.80) in CY14 versus NPAT of PkR210mn (EPS
kR0.28) posted in CY13, an encouraging growth of 185%YoY. Sales are expected to move past trough, growing by 10%YoY, where management's focus on volumes throughout CY14 has borne fruits with major product categories already recovering from sales loss on account of distribution issues (CY14E sales: 41.3bn). On a sequential basis, we anticipate NPAT to jump up to PkR360mn (EPSkR0.47) in 4QCY14 against a loss of PkR77mn (LPS: PkR0.10) in 3QCY14, led by 5%QoQ growth in sales and uptick in GMs. While GMs are expected to tread 340bps lower YoY at an average 18.6% in CY14E versus 22% in CY13, they are projected to make a sequential rebound in 4QCY14 to stand at 20% on account of 1) higher than expected drop in global dairy prices, 2) seasonal weakness in milk procurement prices, 3) recent price increments taken on certain product categories and 4) dip in FO prices where fuel and energy is ~4% of total cost. Having gained a solid 21% CYTD, EFOODS currently trades at a forward P/E of 57x. While sustainability of the recent bullish momentum will depend heavily on the degree of sequential improvement in earnings, we advise timing entry post CY14 result announcement. Our TP of PkR120.8/sh implies a Neutral stance.
EFOODS is scheduled to announce its CY14 results on 26 Jan'15. In this regard, we expect the company to post NPAT of PkR612mn (EPS: PkR 0.80) in CY14 versus NPAT of PkR210mn (EPS
kR0.28) posted in CY13, an encouraging growth of 185%YoY. Sales are expected to move past trough, growing by 10%YoY, where management's focus on volumes throughout CY14 has borne fruits with major product categories already recovering from sales loss on account of distribution issues (CY14E sales: 41.3bn). On a sequential basis, we anticipate NPAT to jump up to PkR360mn (EPSkR0.47) in 4QCY14 against a loss of PkR77mn (LPS: PkR0.10) in 3QCY14, led by 5%QoQ growth in sales and uptick in GMs. While GMs are expected to tread 340bps lower YoY at an average 18.6% in CY14E versus 22% in CY13, they are projected to make a sequential rebound in 4QCY14 to stand at 20% on account of 1) higher than expected drop in global dairy prices, 2) seasonal weakness in milk procurement prices, 3) recent price increments taken on certain product categories and 4) dip in FO prices where fuel and energy is ~4% of total cost. Having gained a solid 21% CYTD, EFOODS currently trades at a forward P/E of 57x. While sustainability of the recent bullish momentum will depend heavily on the degree of sequential improvement in earnings, we advise timing entry post CY14 result announcement. Our TP of PkR120.8/sh implies a Neutral stance.
Neutron
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ullish Profile Intact Despite Overbought Readings
Short‐Term: Expect continuation of northbound momentum towards 34,320 level with immediate support placed around 33,818 level. Short-term profile continues to appear bullish above last gap left between 33,688 — 33629 levels despite the 14-day RSI (81) entering bull market momentum resistance between 80 — 90 readings. Lock profits on strength in cements, hold banks while accumulating oil, fertilizer, textile and insurance sectors on dips.
13-day Leaders: KTML, SHFA, DAWH, PACE, CEPB, PCAL, HUMNL, NETSOL, JSCL & MARI
13-day Laggards: GRAYS, MUREB, PAKT, NPL, EFERT, NCPL, PIOC, IGIIL, ATLH & PKGS
Short‐Term: Expect continuation of northbound momentum towards 34,320 level with immediate support placed around 33,818 level. Short-term profile continues to appear bullish above last gap left between 33,688 — 33629 levels despite the 14-day RSI (81) entering bull market momentum resistance between 80 — 90 readings. Lock profits on strength in cements, hold banks while accumulating oil, fertilizer, textile and insurance sectors on dips.
13-day Leaders: KTML, SHFA, DAWH, PACE, CEPB, PCAL, HUMNL, NETSOL, JSCL & MARI
13-day Laggards: GRAYS, MUREB, PAKT, NPL, EFERT, NCPL, PIOC, IGIIL, ATLH & PKGS
SBD-3
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SBD-3
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On a side note how many of the people here invest in forex,stocks and commodities?
My holdings
Allied Bank
United Bank
Pak Electron(newly created)
Masood Textiles (New)
Saif Power
Avanceon
Stocks on my active watchlist for future entry
Hino Pak Motors
Honda Cars
Hascol
Engro Powergen
National Bank
Punjab Oil Mills
Hum Network
Golden Arrow Selected Stocks Fund
My holdings
Allied Bank
United Bank
Pak Electron(newly created)
Masood Textiles (New)
Saif Power
Avanceon
Stocks on my active watchlist for future entry
Hino Pak Motors
Honda Cars
Hascol
Engro Powergen
National Bank
Punjab Oil Mills
Hum Network
Golden Arrow Selected Stocks Fund
Neutron
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M holding PAEL what are your views?
SBD-3
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70+ target by june.
pak-marine
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What do suggest for starters what's a safe bet ?
Neutron
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Preview & Outlook
FFBL is scheduled to announce its CY14 results on 29 Jan'15. In this regard, we expect the company to post NPAT of PkR3.24bn (EPS: PkR 3.48) in CY14 versus NPAT of PkR5.61bn (EPS: PkR6.01) posted in CY13; down 42%YoY. The prime reasons for the expected dip in earnings are: 1) sales down by 12%YoY as volumes were down for both DAP (-11%YoY) and Urea (-5%YoY) and 2) 4ppt YoY decline in GMs attributable to increase in GIDC levied on both feedstock (up by 52%) and fuel stock (up by 50%). On a sequential basis, we expect the company to post NPAT of PKR 1.47bn (EPS: PKR 1.58) in 4QCY14, up significantly by 52% QoQ as seasonality (wheat sowing season) is expected to play its part in pushing up earnings. Furthermore, rise in other income by a hefty 101%YoY is anticipated to lend significant support to the bottom-line. The result announcement is expected to be accompanied by a final dividend of PkR1.4/sh taking the total payout for CY14E to PkR3.15/sh. While FFBL can be considered as a dividend play (CY15F D/Y: 8.7%), we believe the company's fundamental outlook remains weak particularly as farm incomes come under pressure on the back of record low commodity prices. Trading at a forward P/E multiple of 11.4x, our TP of PkR44/sh implies a Reduce stance. .
CY14E Earnings to go down by 42%YoY: FFBL is expected to post NPAT of PkR3.24bn (EPS: PkR 3.48) in CY14 versus NPAT of PkR5.61bn (EPS: PkR6.01) posted in CY13; down 42%YoY. The prime reasons for the expected dip in earnings are: 1) sales down by 12%YoY as volumes were down for both DAP (-11%YoY) and Urea (-5%YoY) and 2) 4ppt YoY decline in GMs attributable to increase in GIDC levied on both feedstock (up by 52% to PkR300/mmbtu) and fuel stock (up by 50% at PkR150/mmbtu). On a sequential basis, we expect the company to post NPAT of PKR 1.47bn (EPS: PKR 1.58) in 4QCY14, up significantly by 52% QoQ as seasonality (wheat sowing season) is expected to play its part in pushing up earnings. Moreover, FFBL's share of profit from associates is expected to improve sharply (up 101%YoY) both in 4QCY14 and CY14 primarily due to improved profitability from Askari Bank.
Gas price hike on the cards: The GoP is considering a further increase in gas prices, where we believe FFBL's margins are likely to come under pressure again. Although, as per news reports, the GoP does not plan to raise gas prices for Fertilizer; we believe exemption will only be for fertilizer feed. As per our calculations, every PkR100/mmbtu increase in fertilizer fuel not passed on shall lead to annualized earnings attrition of PkR0.31/share for FFBL. Moreover, gross margins have already dipped to 22% in CY14 from 27% last year due to imposition of GIDC hike by PkR103/mmbtu on feed and PkR100/mmbtu on fuel during the year. Industry increased urea price by only PkR85/bag in CY14 while FFBL required a urea price increase of about PkR473/bag to compensate for higher cost of production of both urea and DAP. However, in the case of reversal in GIDC, FFBL will remain one of the biggest beneficiaries amongst the industry. .
Investment Perspective: Having under-performed the market by 24% in CY14, FFBL trades at a forward P/E of 11.4x. While we continue to prefer FFBL as a dividend play particularly in the backdrop of softening interest rate environment, the company’s core fundamentals do not have much to offer. That said, upside risks could emanate from successful initiation of various projects (Fauji Meat Ltd, FFBL Power and Noon Pakistan) undertaken by the company, not yet incorporated in our model. Our TP of PKR 44/sh implies a Reduce stance on the scrip.
FFBL is scheduled to announce its CY14 results on 29 Jan'15. In this regard, we expect the company to post NPAT of PkR3.24bn (EPS: PkR 3.48) in CY14 versus NPAT of PkR5.61bn (EPS: PkR6.01) posted in CY13; down 42%YoY. The prime reasons for the expected dip in earnings are: 1) sales down by 12%YoY as volumes were down for both DAP (-11%YoY) and Urea (-5%YoY) and 2) 4ppt YoY decline in GMs attributable to increase in GIDC levied on both feedstock (up by 52%) and fuel stock (up by 50%). On a sequential basis, we expect the company to post NPAT of PKR 1.47bn (EPS: PKR 1.58) in 4QCY14, up significantly by 52% QoQ as seasonality (wheat sowing season) is expected to play its part in pushing up earnings. Furthermore, rise in other income by a hefty 101%YoY is anticipated to lend significant support to the bottom-line. The result announcement is expected to be accompanied by a final dividend of PkR1.4/sh taking the total payout for CY14E to PkR3.15/sh. While FFBL can be considered as a dividend play (CY15F D/Y: 8.7%), we believe the company's fundamental outlook remains weak particularly as farm incomes come under pressure on the back of record low commodity prices. Trading at a forward P/E multiple of 11.4x, our TP of PkR44/sh implies a Reduce stance. .
CY14E Earnings to go down by 42%YoY: FFBL is expected to post NPAT of PkR3.24bn (EPS: PkR 3.48) in CY14 versus NPAT of PkR5.61bn (EPS: PkR6.01) posted in CY13; down 42%YoY. The prime reasons for the expected dip in earnings are: 1) sales down by 12%YoY as volumes were down for both DAP (-11%YoY) and Urea (-5%YoY) and 2) 4ppt YoY decline in GMs attributable to increase in GIDC levied on both feedstock (up by 52% to PkR300/mmbtu) and fuel stock (up by 50% at PkR150/mmbtu). On a sequential basis, we expect the company to post NPAT of PKR 1.47bn (EPS: PKR 1.58) in 4QCY14, up significantly by 52% QoQ as seasonality (wheat sowing season) is expected to play its part in pushing up earnings. Moreover, FFBL's share of profit from associates is expected to improve sharply (up 101%YoY) both in 4QCY14 and CY14 primarily due to improved profitability from Askari Bank.
Gas price hike on the cards: The GoP is considering a further increase in gas prices, where we believe FFBL's margins are likely to come under pressure again. Although, as per news reports, the GoP does not plan to raise gas prices for Fertilizer; we believe exemption will only be for fertilizer feed. As per our calculations, every PkR100/mmbtu increase in fertilizer fuel not passed on shall lead to annualized earnings attrition of PkR0.31/share for FFBL. Moreover, gross margins have already dipped to 22% in CY14 from 27% last year due to imposition of GIDC hike by PkR103/mmbtu on feed and PkR100/mmbtu on fuel during the year. Industry increased urea price by only PkR85/bag in CY14 while FFBL required a urea price increase of about PkR473/bag to compensate for higher cost of production of both urea and DAP. However, in the case of reversal in GIDC, FFBL will remain one of the biggest beneficiaries amongst the industry. .
Investment Perspective: Having under-performed the market by 24% in CY14, FFBL trades at a forward P/E of 11.4x. While we continue to prefer FFBL as a dividend play particularly in the backdrop of softening interest rate environment, the company’s core fundamentals do not have much to offer. That said, upside risks could emanate from successful initiation of various projects (Fauji Meat Ltd, FFBL Power and Noon Pakistan) undertaken by the company, not yet incorporated in our model. Our TP of PKR 44/sh implies a Reduce stance on the scrip.
Neutron
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Heating Momentum Needs A Breather
Short‐Term: With the daily RSI (82.67) entering bull market momentum resistance, the benchmark KSE hit 34,320 level yesterday. Heating momentum can produce a breather towards 33,948 level with immediate resistance at yesterday’s high of 34,395 level. Ability to surpass the aforementioned resistance would refresh the momentum towards 34,679 level. Lock profits on strength in cements, hold banks while accumulating oil, fertilizer, textile and insurance sectors on dips.
13-day Leaders: SHFA, DAWH, CEPB, JSCL, MARI, HUMNL, KTML, THALL, PSMC & PACE
13-day Laggards: PAKT, NPL, MUREB, ABOT, NCL, NCPL, ARM, EFERT, LPCL & GRAYS
Short‐Term: With the daily RSI (82.67) entering bull market momentum resistance, the benchmark KSE hit 34,320 level yesterday. Heating momentum can produce a breather towards 33,948 level with immediate resistance at yesterday’s high of 34,395 level. Ability to surpass the aforementioned resistance would refresh the momentum towards 34,679 level. Lock profits on strength in cements, hold banks while accumulating oil, fertilizer, textile and insurance sectors on dips.
13-day Leaders: SHFA, DAWH, CEPB, JSCL, MARI, HUMNL, KTML, THALL, PSMC & PACE
13-day Laggards: PAKT, NPL, MUREB, ABOT, NCL, NCPL, ARM, EFERT, LPCL & GRAYS
Neutron
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Good holding power, blue chip companies , patience and good entry exit decisions
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