KSE-100 Index Performance from its 6-Month low (Dec 17)

Transcription

1 REP-300 KSE-100 Index Performance from its 6-Month low (Dec 17) 16-May-2018 Analyst: AHL Research Best Domestic Equity House Best Equity House Corporate Finance House of the Year Top 25 Listed Companies

2 Market generated a return of 12.1% The KSE-100 index has managed to generate a return of 12.1% since its 6-month low witnessed in 19 th Dec 17 to 14 th May 18. Pertinently, 5 sectors have managed to outperform the benchmark equity bourse during the period under review, while 5 sectors yielded lower returns than the stock market. We have summarized the performance in upcoming slides. We believe the market will perform better in the upcoming caretaker setup, which is expected to take charge from 1 st June 2018, as has been witnessed during previous regimes. In the following slides, you can observe the market performance (average 14.1%) during previous 5 caretaker setups. The KSE-100 index is currently trading at a PER of 9.8x (2018) compared to Asia Pac regional average of 14.5x while offering DY of ~5.5% versus ~2.4% offered by the region Our top picks are OGDC, PPL, UBL, ABL, AKBL, LUCK, DGKC, MLCF, ASTL, EFERT, SNGP, KAPCO, HUBC, MTL and INDU. 2

3 Outperforming Sectors Cements delivering one of the highest returns in the KSE-100 index of 22.4% as price hikes in North during the post winter season provided relief to the sector. Oil and Gas Marketing Companies witnessed a hefty return of 21.3% owed to massive jump in volumes of petroleum products and margin expansion on deregulated products. Whereas under gas utilities, SSGC in particular garnered interest amid expectations of UFG control and clearance of previous losses in a manner similar to SNGP. Fertilizer sector outperformed the local bourse posting a 20% return during the period as low inventory levels coupled with price hikes, anticipation of GIDC arrears settlement and reduction in GIDC going forward kept the investor s interest in-check. Commercial Banks provided a return of 14.5% outperforming the broader KSE-100 index (+ 12.1%) led by discount rate hike of 25bps during Jan 18 alongside further increase expected in the future as core inflation inches higher. Engineering managed to underscore a robust return of 12.8% in the period under review as margin accretion during 2QFY18 of major players kept bottom-lines strong. 3

4 Underperforming Sectors E&Ps return during the period clocked-in at 9%, underperforming the KSE-100 index by 3.5ppts mainly due to foreign selling (USD 37mn). Albeit, the positive return is primarily attributed to higher oil prices (Arab light up 20%) along with PKR depreciation during the period. Power sector yielded a positive return of 8% on account of PKR depreciation by 4.2% during the period under review. However, underperformance vis-à-vis the index was owed to rising levels of receivables which forced companies to skip dividend. Automobile Assemblers sector provided a return of 6.2% compared to average return of 12.1% from market low to current levels given decline in earnings due to PKR depreciation and higher steel prices. Textile composite performance remained depressed as value added sector felt the heat in the wake of companies finding it difficult to pass on the impact of rising input costs. While, spinning sector generated a return of 19.9% owed to low cost of cotton as government eliminated custom duty and regulatory duty on import of cotton. Refineries performance remained subdued as sector posted a negative return of 8.8% during the period amid uncertainty with respect to FO offtake tagged with exchange losses amid PKR depreciation. 4

5 Sector Performance Index / Mkt Cap (PKR mn) Sr No. Sector 14-May Dec-17 Change 42, , % 1 Refinery 16,641 18, % 2 Miscellaneous 28,880 31, % 3 Textile Weaving 1,110 1, % 4 Cable & Electrical Goods 9,889 10, % 5 Leather & Tanneries 3,883 4, % 6 Woollen % 7 Tobacco 32,857 33, % 8 Automobile Parts & Accessories 21,885 22, % 9 Transport 16,689 16, % 10 Glass & Ceramics 6,539 6, % 11 Textile Composite 40,779 39, % 12 Sugar & Allied Industries 3,228 3, % 13 Synthetic & Rayon 1,056 1, % 14 Technology & Communication 31,244 29, % 15 Automobile Assembler 78,195 73, % 16 Leasing Companies 2,978 2, % 17 Power Generation & Distribution 124, , % Source: Bloomberg, AHL Research 5

6 Sector Performance Index / Mkt Cap (PKR mn) Sr No. Sector 14-May Dec-17 Change 42, , % 18 Close - End Mutual Fund 8,012 7, % 19 Modarabas % 20 Insurance 31,463 28, % 21 Oil & Gas Exploration Companies 309, , % 22 Food & Personal Care Products 51,422 47, % 23 Pharmaceuticals 46,109 42, % 24 Paper & Board 15,612 14, % 25 Chemical 37,896 34, % 26 Engineering 40,427 35, % 27 Commercial Banks 476, , % 28 Fertilizer 259, , % 29 Textile Spinning 1,855 1, % 30 Real Estate Investment Trust 7,188 5, % 31 Oil & Gas Marketing Companies 120,069 98, % 32 Cement 172, , % 33 Inv. Banks / Inv. Cos. / Securities Cos. 8,694 6, % 34 Vanaspati & Allied Industries 2,048 1, % Source: Bloomberg, AHL Research 6

7 Companies Performance Code Company 14-May-18 Price 19-Dec-17 Change KSE100 Index 42, , % NRL National Refinery Ltd % HCAR Honda Atlas Cars (Pakistan) Ltd % PSEL Pakistan Services Ltd % ARPL Archroma Pakistan Ltd % CSAP Crescent Steel & Allied Products Ltd % NCPL Nishat Chunian Power Ltd % FML Feroze1888 Mills Ltd % ASTL Amreli Steels Ltd % PAEL Pak Elektron Ltd % BATA Bata Pakistan Ltd. 2, , % SHFA Shifa International Hospitals Ltd % PAKT Pakistan Tobacco Company Ltd. 1, , % COLG Colgate-Palmolive (Pakistan) Ltd. 2, , % BNWM Bannu Woollen Mills Ltd % THALL Thal Ltd % NML Nishat Mills Ltd % KEL K-Electric Ltd % PTC Pakistan Telecommunication Company Ltd % ATRL Attock Refinery Ltd % PICT Pakistan International Container Terminal Ltd % EFUG EFU General Insurance Ltd % PIBTL Pakistan International Bulk Terminal Ltd % PMPK Philip Morris (Pakistan) Ltd. 3, , % AGIL Agriauto Industries Ltd % NPL Nishat Power Ltd % Source: Bloomberg, AHL Research 7

8 Companies Performance Code Company 14-May-18 Price 19-Dec-17 Change KSE100 Index 42, , % HUMNL Hum Network Ltd % PSMC Pak Suzuki Motor Company Ltd % TRG TRG Pakistan Ltd % SPWL Saif Power Ltd % ABOT Abbott Laboratories (Pakistan) Ltd % GHGL Ghani Glass Ltd % FATIMA Fatima Fertilizer Company Ltd % JDWS JDW Sugar Mills Ltd % INDU Indus Motor Company Ltd. 1, , % MLCF Maple Leaf Cement Factory Ltd % NESTLE Nestle Pakistan Ltd. 12, , % IBFL Ibrahim Fibres Ltd % MUREB Murree Brewery Company Ltd % OGDC Oil & Gas Development Company Ltd % MCB MCB Bank Ltd % SCBPL Standard Chartered Bank (Pak) Ltd % JLICL Jubilee Life Insurance Company Ltd % OLPL Orix Leasing Pakistan Ltd % SNGP Sui Northern Gas Pipelines Ltd % UBL United Bank Ltd % HBL Habib Bank Ltd % PGF PICIC Growth Fund % HUBC The Hub Power Company Ltd % NCL Nishat Chunian Ltd % FHAM First Habib Modaraba % Source: Bloomberg, AHL Research 8

9 Companies Performance Code Company 14-May-18 Price 19-Dec-17 Change KSE100 Index 42, , % SEARL The Searle Company Ltd % PKGS Packages Ltd % PPL Pakistan Petroleum Ltd % NATF National Foods Ltd % MARI Mari Petroleum Company Ltd. 1, , % PIOC Pioneer Cement Ltd % BWCL Bestway Cement Ltd % DGKC D.G. Khan Cement Company Ltd % KTML Kohinoor Textile Mills Ltd % POL Pakistan Oilfields Ltd % NBP National Bank of Pakistan % JSCL Jahangir Siddiqui & Co. Ltd % DAWH Dawood Hercules Corporation Ltd % ENGRO Engro Corporation Ltd % SHEL Shell Pakistan Ltd % KOHC Kohat Cement Company Ltd % AICL Adamjee Insurance Company Ltd % FABL Faysal Bank Ltd % MTL Millat Tractors Ltd. 1, , % ATLH Atlas Honda Ltd % ISL International Steels Ltd % MEBL Meezan Bank Ltd % GLAXO GlaxoSmithKline Pakistan Ltd % GADT Gadoon Textile Mills Ltd % AKBL Askari Bank Ltd % Source: Bloomberg, AHL Research 9

10 Companies Performance Code Company 14-May-18 Price 19-Dec-17 Change KSE100 Index 42, , % DCR Dolmen City REIT % KAPCO Kot Addu Power Company Ltd % ICI ICI Pakistan Ltd % EFERT Engro Fertilizers Ltd % PSO Pakistan State Oil Company Ltd % FFBL Fauji Fertilizer Bin Qasim Ltd % INIL International Industries Ltd % FCCL Fauji Cement Company Ltd % APL Attock Petroleum Ltd % EFOODS Engro Foods Ltd % CHCC Cherat Cement Company Ltd % BAFL Bank Alfalah Ltd % EPCL Engro Polymer & Chemicals Ltd % ABL Allied Bank Ltd % LUCK Lucky Cement Ltd % FFC Fauji Fertilizer Company Ltd % SYS Systems Ltd % BAHL Bank AL Habib Ltd % PSX Pakistan Stock Exchange Ltd % SSGC Sui Southern Gas Company Ltd % HASCOL Hascol Petroleum Ltd % HMB Habib Metropolitan Bank Ltd % BOP The Bank of Punjab % UNITY Unity Foods Ltd % Source: Bloomberg, AHL Research 10

11 Close Ties to Politics Historical data suggests that the benchmark KSE-100 index has delivered a positive return of 14% on average during prior caretaker setups (please refer to graphs on the next few slides for more clarity). Hence, taking cue from said trend and given political noise and / or economic conditions remain manageable, the KSE-100 could potentially provide a decent positive return during the new caretaker setup expected to take office from June 1, 2018.

12 1-Apr-93 8-Apr Apr Apr Apr-93 6-May May May May-93 1-Jul Jul Jul Aug Aug-93 9-Sep Sep-93 7-Oct Oct-93 KSE-100 Index Performance Market Performance during previous caretaker governments Caretaker Prime Minister: Mir Balakh Sher Mazari Date Formed: 18-Apr-93 Date Dissolved: 26-May-93 KSE100 Return: 2.0% Exhibit: KSE100 Index Performance Caretaker Prime Minister: Moin Ahmad Qureshi Date Formed: 18-Jul-93 Date Dissolved: 19-Oct-93 KSE100 Return: 14.4% Exhibit: KSE100 Index Performance 1,180 1,160 1,140 1,120 1,100 1,080 1,060 1,610 1,560 1,510 1,460 1,410 1,360 1,310 1,260 1,210 1,160 Source: PSX, AHL Research Source: PSX, AHL Research 12

13 4-Nov Nov Nov Nov-96 3-Dec Dec Dec Dec-96 6-Jan Jan Jan Jan Jan-97 3-Feb Feb Feb Feb-97 1-Nov Nov Nov Dec Dec Jan Jan-08 7-Feb Feb-08 6-Mar Mar-08 KSE-100 Index Performance Market Performance during previous caretaker governments Caretaker Prime Minister: Malik Meraj Khalid Date Formed: 05-Nov-96 Date Dissolved: 17-Feb-97 KSE100 Return: 15.3% Exhibit: KSE100 Index Performance 1,860 1,760 1,660 1,560 1,460 1,360 Caretaker Prime Minister: Muhammad Mian Somoro Date Formed: 16-Nov-07 Date Dissolved: 25-Mar-08 KSE100 Return: 15.6% Exhibit: KSE100 Index Performance 15,500 15,000 14,500 14,000 13,500 1,260 13,000 Source: PSX, AHL Research Source: PSX, AHL Research 13

14 1-Mar Mar Mar Apr Apr May May-13 7-Jun Jun-13 KSE-100 Index Performance Market Performance during previous caretaker governments Caretaker Prime Minister: Justice (R) Mir Hazar Khan Khoso Date Formed: 25-Mar-13 Date Dissolved: 5-Jun-13 KSE100 Return: 23.0% Exhibit: KSE100 Index Performance 24,000 23,000 22,000 21,000 20,000 19,000 18,000 17,000 Source: PSX, AHL Research 14

15 Disclaimer Analyst Certification: The research analyst(s) is (are) principally responsible for preparation of this report. The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject security (ies) or sector (or economy), and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. In addition, we currently do not have any interest (financial or otherwise) in the subject security (ies). Furthermore, compensation of the Analyst(s) is not determined nor based on any other service(s) that AHL is offering. Analyst(s) are not subject to the supervision or control of any employee of AHL s non-research departments, and no personal engaged in providing non-research services have any influence or control over the compensatory evaluation of the Analyst(s). Equity Research Ratings Arif Habib Limited (AHL) uses three rating categories, depending upon return form current market price, with Target period as Dec 18 for Target Price. In addition, return excludes all type of taxes. For more details kindly refer the following table; Rating BUY HOLD SELL Description Upside* of subject security(ies) is more than +10% from last closing of market price(s) Upside* of subject security(ies) is between -10% and +10% from last closing of market price(s) Upside* of subject security(ies) is less than -10% from last closing of market price(s) Equity Valuation Methodology AHL Research uses the following valuation technique(s) to arrive at the period end target prices; Discounted Cash Flow (DCF) Dividend Discounted Model (DDM) Sum of the Parts (SoTP) Justified Price to Book (JPTB) Reserved Base Valuation (RBV Risks The following risks may potentially impact our valuations of subject security (ies); Market risk Interest Rate Risk Exchange Rate (Currency) Risk 15

16 Disclaimer This document has been prepared by Research analysts at Arif Habib Limited (AHL). This document does not constitute an offer or solicitation for the purchase or sale of any security. This publication is intended only for distribution to the clients of the Company who are assumed to be reasonably sophisticated investors that understand the risks involved in investing in equity securities. The information contained herein is based upon publicly available data and sources believed to be reliable. While every care was taken to ensure accuracy and objectivity, AHL does not represent that it is accurate or complete and it should not be relied on as such. In particular, the report takes no account of the investment objectives, financial situation and particular needs of investors. The information given in this document is as of the date of this report and there can be noassurance that future results or events will beconsistent with this information. This information is subject to change without any prior notice. AHL reserves the right to make modifications and alterations to this statement as may be required from time to time. However, AHL is under no obligation to update or keep the information current. AHL is committed to providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Past performance is not necessarily a guide to future performance. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for any investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred tointhis document (including the merits and risks involved), and should consult his or her own advisors to determine the merits and risks of such investment. AHL or any of its affiliates shall not be in any way responsible for any loss or damage that may be arise to any person from any inadvertent error in the information contained in this report Arif Habib Limited: Corporate Member of the Pakistan Stock Exchanges. No part of this publication may be copied, reproduced, stored or disseminated in any form or by any means without the prior written consent of Arif Habib Limited. Disclosure required under Research Analyst Regulations, 2015: In order to avoid any conflict of interest, wehereby disclosed that; Arif Habib Limited (AHL) has shareholding in SNGP. 16

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