Grow further financial consultancy

05/01/2012

Engro urea price hike Rs. 210/ bag engro should fly tomm.

05/01/2012

Dheyaan for 5 jan

Kindly place your stoplosses given in the previous report and hold on to your positions.

05/01/2012

SECP, FBR officials to mull relaxing CGT rules

Salman Siddiqui
Thursday, January 05, 2012

KARACHI: The officials of Securities and Exchange Commission of Pakistan (SECP) and Federal Board of Revenue (FBR) are scheduled to meet in Islamabad on Thursday to consider relaxing the Capital Gains Tax (CGT) rules, official sources told The News on Wednesday.

The meeting was supposed to be held on Tuesday, but was postponed due to some other engagements of the concerned officials, an FBR official said.

The FBR may agree to collect investors’ shares trading data from the date CGT was imposed on shares transaction. “At present, FBR is demanding such data for the last five years prior to CGT imposition,” an official said.

He said this with reference to a previous meeting between SECP and Finance Minister Hafeez Shaikhj, in which the Minister had reportedly agreed to allowing access to investors’ shares trading data from the date the CGT was imposed on July 01, 2010.

In another separate meeting to be held in a week or two, SECP chairman Muhammad Ali would deliver a presentation on the same matter at ministry of finance, an SECP official said.

SECP, on behalf of the Karachi Stock Exchange (KSE) and other two bourses of the country, would try to explain to the officials of FBR and ministry of finance, as to how the implementation of CGT has affected the bourses and their members.

The average daily trade turnover at KSE has fallen to 10 years low of 81 million shares in the previous calendar year 2011 and caused several members to render their staff jobless and close their brokerage houses.

KSE and its members want FBR and finance ministry to collect the said tax under Presumptive Tax Regime (PTR) instead of on shares’ sale. The collection of the tax under PTR regime would not demand members and investors to disclose their source of income, it was learnt.

Finance minister had categorically denied doing so in the previous meeting and said that the tax would not be exempted, nor be collected under PTR regime.

“The maximum relaxation that ministry may allow, may be the collection of investors’ data from the date the tax was imposed instead of for the last five years period,” FBR official said.

The Federal Board of Revenue directs KSE not to collect tax on services.

In a separate development, FBR has directed the Karachi Stock Exchange (KSE) not to deduct tax on services to its members up to June 30, 2012, said a notice of KSE on Wednesday.

03/01/2012

http://www.cnbc.com/id/45822986/

What should investors watch in 2012? As the new year dawns, there are plenty of short-term issues on the horizon, ranging from the eurozone to fiscal gridlock in the US to upheavals in the Middle East. The Financial Times reports

03/01/2012

KARACHI: Oil & Gas Development Corporation Limited (OGDC) has discovered a hydrocarbon bearing zone in its exploratory well Zin X-1 located in District Dera Bugti, Balochistan, says the notice sent by the company to the Karachi Stock Exchange (KSE) on Tuesday.

The well was drilled down to the depth of 2300 M targeting to test the hydrocarbon potential of Pab sandstone and Sui main limestone formations. According to the company, the significant reserves of hydrocarbons have been found at Zin X-1 well.

The first targeted zone Pab Sandstone has tested 5.48 mmcfd gas and the discovery will add significantly to the hydrocarbon reserves base of the company.

According to the market experts, discovery flow rate fall extremely fall of expectations and the gas obtained from the field has also low heating value. The stake of the company in the block is 82.5 percent along with 17.5 percent stake of government.

The OGDC has adopted an aggressive exploration strategy and the exploration company has invested heavily in major other projects including Sinjhoro, KPD/TAY, Nashpa, TAL and Uch II

03/01/2012

Up Up and Awayyyyyyy .....

Across the board rally was witnessed with comparetively better volumes indicating that bulls may take charge at the floor of Kse-100 with banking sector in the lime light as mentioned in our report posted on 29th dec 2011. We mantain our buy and hold stance on MCB with initial target of 152 and trailing stoploss at 141 and as for NBP we mantain our hold stance with buy on dip. As for oil and gas secot is concern we mantain our hold and buy on dip stance with pol and ppl among our top picks.

We belive that if the index manages to breach above 11450-11470 level then that will add more momentum for the bulls to touch 11600-11650 level in coming sessions.

Request for individual scrips are welcome and will be entertained in full professional manner.

Grow Further Team.

03/01/2012

Fertilizer – Bearing the brunt
With the announcement of price hike by 14% and implementation of GIDC by 193%, taking
total cost of input to rise by 207%, we see old fertilizer plants will be the worst hit.
However, ENGRO’s EnVen and FATIMA will only be charged with a 1.81% increase in feed
stock prices while no cess has been imposed on the said plants. In addition, a 14% rise in
fuel stock will further increase the cost of production for the already hit sector.

FFC – the worst hit or neutral?
In order to counter the impact, FFC has in turn raised its urea price by PKR 50/bag, which
we believe is to offset the impact of semi-annual price hike by OGRA. However, we believe
total price impact for the company is PKR 252/bag, potentially requiring the company to
increase prices by another PKR 202/bag, where we have incorporated a gradual cost pass
through in the short term. Nonetheless, we now expect CY12E earnings to grow by 14% to
PKR 27.16/share, incorporating a measured price pass through and lower dividend
contribution from FFBL.

FFBL – Hike in gas tariff further adds to DAP grievance
Price hike for FFBL will be similar to that of FFC, hence we believe FFC’s full price pass
through may still lack the ability to neutralize the impact. To further augment the dismay,
declining DAP prices in the international market, where US Tampa down by 2% to USD
573/MT since start of Dec11. Similarly, we have incorporated a decline in local DAP prices
during CY12. However, we might witness some respite from lower P205 contract to be
settled for 1Q CY12, where Indian buyers are looking for a discount from OCP which will
allow a slight reduction in the new contract. Even so, we believe that the decline in
international price will be reflected in the local market, resulting in a sharp decline in DAP
primary margins for CY12.

At current levels, we believe market will mainly focus on the manufacturers’ ability to pass
on the price hike. However, with higher than expected increase in gas cost we term the
price hike is needed to sustain margins. We believe, FATIMA will be the major beneficiary
from any significant price hike, while ENGRO will be partially benefited from the fixed gas
cost.

03/01/2012

Wellhead gas prices likely to go up

KARACHI: The higher Arab Light Crude oil prices and high Sulphur Furnace Oil (HSFO) prices could prop up the wellhead gas prices for the second half of the financial year 2HFY12.

The Pakistan rupee has also depreciated by 3 percent against US dollar, which will further improve the gas pricing for the E&P sector in Rupee terms.

Oil & Gas Regulatory Authority (OGRA) is likely to revise wellhead gas prices for 2HFY12 up to 9 percent on the back of 10 percent increase in both Arab Light Crude oil and High Sulphur Furnace Oil (HSFO) prices during Jun-Nov 2011, says the research note of JS Global Capital Limited.

OGRA revises wellhead gas prices for E&P sector every January and July, based on the average Arab Light crude oil and HSFO prices during the first six months of the preceding seven month period.

According to the note, the Arab Light crude oil prices have averaged at $107/bbl during the Jul-Nov 2011 versus $97/bbl in the previous six months, resulting in an increase of 10 percent. Similarly, average HSFO prices are also up by 10 percent to $650/ton against.

The Pakistan Rupee has also remained under severe pressure against US dollar during the first half of the financial year and depreciated by 3 percent. However, the weak situation of Pakistan rupee bodes well for the Oil & gas exploration companies since their revenues are dominated in dollar terms.

The Pakistan Petroleum Limited (PPL) would be the major beneficiary of the wellhead price hike since its business revenues are dominated from the gas production. Increase in price will also be helpful for other gas suppliers, but will bode negatively for manufacturing sector which will face hard times in remaining competitive amid declining domestic and foreign demand for goods and services

03/01/2012

Our call for cherry picking was prove to be a HIT !! most of our top picks out performed market by 5%. Updates for tomm will be posted soon. Stay tuned for that.

01/01/2012

KSE seen crossing 13,000-point mark

KARACHI: The Karachi Stock Exchange (KSE) is expected to recover and sustain above 13,000 points threshold in 2012 on likely softening of rules for the market and holding of election before the scheduled time, dealers said on Saturday.
However, foreign selling may take the market to another low in case the regulatory framework is not changed to revive the market and parliamentary election is held on its scheduled time in the first quarter of 2013, they added.
“KSE should recover and sustain around 13,500 points in 2012,” said Imtiaz Gadar, Head of Research at KASB Securities, adding that the softening of rules for financing to the stocks’ investors and in capital gains tax (CGT) would pave the way for recovery at KSE.
The KSE 100-share index fell by about 684 points, or 5.68 percent, in the year ending on December 31, 2011 and stood at 11,347.66 points. The market capitalisation declined by Rs302 billion, or nine percent, to Rs2,945 billion while average daily turnover fell to 10-year low of 81 million shares.
Gadar said that the Securities and Exchange Commission of Pakistan (SECP) and Federal Board of Revenue (FBR) are scheduled to meet next week to consider relaxing rules for CGT, while SECP has already amended rules for margin trading system (MTS) last week.
He argued that prices have fallen to attractive levels for one reason or the other in the preceding year, and any positive news should convince investors to jump on lucrative stocks. Regulatory softening would also convince foreign investors to prolong their stay at KSE, he added.
Muhammad Sohail, Chief Executive Officer of Topline Securities, said that the benchmark 100-share index may reach 13,000 points in 2012 if the parliamentary election is held before the scheduled time. He said that PML-N, which holds a majority in Pakistan’s largest province Punjab and nearly a fifth of National Assembly seats, can force new elections only if its members resign from parliament, but the chances of this is low.
“Though probability of early election is low, the market may rally if independent caretaker government is appointed to supervise the election 2012,” he said.
He said that the energy and fertiliser stocks would continue to perform in 2012 due to strong fundamentals, while fewer banks will perform once the process of economic recovery is commenced.
He asked investors to keep close focus on foreign movement at KSE, as debt crisis in Europe would compel them to trim their holdings in emerging Asian markets. “We believe foreigners will continue to be a major force in the Pakistani capital market as they hold $2.4 billion worth of shares which is 29 percent of free-float and seven percent of market capitalisation.
Majority of investors attributed the decline in KSE in 2011 to massive foreign selling. According to the National Clearing Company of Pakistan Limited, foreigners sold net shares worth $127.21 million in the year 2011 against $526.37 million net buying in the previous calendar year 2010.
Dealers, however, added that KSE was not an exceptional market where foreigners sold shares in 2011, but they sold shares at Taiwan, Korea and Indian markets during the year.
They said that developments in Pakistan-US relationship would also shape things at KSE, as improvement in ties would help Pakistan’s economy improving on account of US aid, while energy crisis would be bad for the economy, but good for oil marketing stocks, they added
Syed Atif Zafar, an analyst at JS Global, said that investors remained cautious during the year because of (1) strained relationship between Pakistan and the US, (2) falling popularity of the incumbent government, (3) US debt rating downgrade along with European debt crisis, 4) energy shortfall, (5) collection of Capital Gains Tax and (6) complex and stringent regulation of leverage products by SECP.

01/01/2012

Nestle prevents heavier stock fall in 2011

KARACHI, Dec 31: The equities at the Karachi stock market plunged 6 per cent, representing fall of 674 points in on the KSE-100 index, which closed at 11,348 points on Friday, the last trading day of the year 2011. At the start of the year, the index stood at the level of 12,022 points.

Gloomy as that sounds, the market would have reflected much poorer performance, but for the helping hand extended by the stock in consumer goods company Nestle Pakitan. But the fact that the support extended by the stock was close to the year has raised many an eyebrows. In just ten trading sessions before the end of 2011, the price in Nestle stock galloped by as much as 61 per cent.

Nestle Pakistan being one of the highest quoted scrips and the KSE-100 index a market capitalization based index, the average index weight of Nestle in the index stands at 4.9 per cent.

With a minimal free-float of 2.27 million shares or just five per cent of the total outstanding shares in the company, the Nestle stock price can easily be moved either way by trading small amount of shares.

Average daily volume for Nestle in 2011 stood at only 354 shares.

Back of the envelope calculations show that the sudden jump of 61 per cent in just ten sessions in the market price of Nestle share contributed as much as 331 points to the KSE-100 index. Were it not for the contribution by Nestle, the stock market would have crashed by 961 points, posting annual loss of 8 per cent in 2011.

Hamad Aslam, head of research at Lakson Investments, pointed out that without the Nestle contribution the index would have closed at 10,017 points, the below 11,000 level causing a deep dent to the investor sentiments.

Many market participants, who would only talk on condi-tion of anonymity, said that it could be either an effort to `manipulate` the index or an effort at `window dressing`.

But who would benefit from such distortions in the actual numbers. It could not be the stock exchange itself for the market performance is not of much value to signify its own performance.

`It is the punters who have the interest in artificially propelling the index,` says Hamad. He reasoned that they hold heavy portfolio of equities and it serves their interest to show a lighter fall, lest the investors run out of the market in fear. Those who have an eye on the matter pointed out that just before the close of financial year to June 30, 2011, Nestle stock had mimicked similar trend, rising steadily by 52 per cent in the last 12 sessions pushing the price of the stock up to 5,475, from Rs3,604 on June 14.

`Given that it was pure manipulation and not supported by genuine buying, the stock eventually lost 60 per cent of its value in the next five months,` says the Lakson Investments, research head.

Another market watcher included the stock in Unilever-also the fast moving consumer good company, as vulnerable to such price manipulation by punters. He pointed out that the average daily business in Unilever amounts to no more than 514 shares in 2011, which was why its price jumped by Rs1,206 to Rs5,566 at end of 2011 from Rs4,360 at the start of the year. His calculation showed that Unilever contribution to the index average weight being 0.05 per cent, the stock had added 60 points to the KSE-100 index. All of that showed that just the two stocks, Nestle Pakistan and Unilever Pakistan, were instrumental in adding 287 points to the index, to limit the lossforyear by 6 per cent against the more reasonable 8 per cent.

Dawn

01/01/2012