Weekly Pakistan Review

June 26, 2009 1

The Weekly Service from Alfalah Securities (Pvt.) Ltd.

In this issue Market Focus…………..…..……..…………………..………...........……. Page 3 By Alfalah Securities Research

Valuation Guide……………….…………………..………….……….……Page 5 By Alfalah Securities Research

The Weeks Ahead Board Meetings Company

Date

Day

Bank of Punjab

29.06.2009

Monday

Fauji Fertilizer Bin Qasim

22.07.2009

Wednesday

June 26, 2009

To Consider Quarterly accounts for the quarter ended March 31, 2009. Half Yearly Accounts (Jan – Jun 2009)

Page 2

Pakistan Weekly Review

Market Focus June 22, 2009 – June 26, 2009 [By Alfalah Securities Research; [email protected] , (9221) 9217825–26]

KSE-100 Weekly Market Performance 200

7,000 100 6,600

6,200

VOLUM E (m n)

KSE100 INDEX

7,400

Jun-19

Jun-22

Jun-23

Jun-24

VOLUME

Jun-25

Jun-26

INDEX

WEEKLY COMPARISON Current

26-Jun-09

19-Jun-09

Previous

Change %

7,040 102 4,776

1.8% 7.3% -2.7%

KSE-100 Index Avg. Volume (mn sh) Avg. Investment (PkR mn)

7,163 109 4,648

Major Stocks (KSE-30) SYMBOL

Netsol Technologies

Current Price

Previous Price

Change %

18.08

15.96

13.3%

D.G. Khan Cement

30.97

27.69

11.8%

MCB Bank

155.03

142.06

9.1%

Lucky Cement

60.64

57.21

6.0%

Nishat Mills Ltd.

38.83

36.96

5.1%

Hub Power Company

27.33

26.30

3.9%

Azard Nine Ltd.

22.69

21.89

3.7%

Oil & Gas Dev.

78.12

75.42

3.6%

Habib Bank Ltd.

88.25

85.61

3.1%

Pak. Telecom Co. Hub Power Company

16.94

16.53

2.5%

June 26, 2009

KSE-100 Index closed at 7,163 up 1.8% over the week. Average Daily Volume during this week stood at 109 mn shares as compared to 102 mn shares last week. On daily closing basis, index touched a high of 7,163 and a low of 7,023. ECONOMY: Amendments in Federal Budget FY10: Yet Again!

State Minister for Finance while winding up the debate on federal budgetFY10 announced a number of changes in the finance bill FY10. Salient features of the proposed changes in the new budget include:Income tax collected on export proceeds to be taken as maximum tax liability

The exporters will take a sigh of relief at this change. Earlier the government in the initial budget has proposed that tax collected on export proceeds shall be treated as minimum tax liability and exporters have to pay additional taxes on the basis of income on exports. Carbon surcharge withdrawn on CNG

The government has proposed to withdraw carbon surcharge on CNG that will cost government PkR 12 bn in terms of revenues. No change has been recommended on the POL products. This measure could have helped to curtail inflation had heavy vehicles have been on CNG. However the measure shall help to keep the price differential intact and encourage the use of CNG. Page 3

No measure has been announced to compensate the loss of revenues due to this measure. FED withdrawn on SMS (20 paisas per SMS) and FED on cellular services increased from proposed rate of 19% to 19.5%

On public demand government has recommended to withdraw the proposal of FED of 20 paisa per SMS and the impact on revenues shall be compensated by increase in FED on cellular services from 19.0% to 19.5%. Beside that a number of other "relief measures" have been recommended that includes increase in ad-hoc allowances of civil and armed forces employees in BPS1-16 from 15% to 20%, reduction in WHT on industrial imports from 4% to 3%. Almost 70 clauses of finance bill are proposed to be deleted and 18 modified. Such a large number of alterations suggest that not much home work has been done before finalizing the new budgetary proposal. All the proposed relief measures shall result in loss of revenues and we believe that it will lower the possibility of collecting estimated revenue targets in the next fiscal year and if the foreign pledges are not materialized as per expectation, the PSDP will have to be axed that will make it difficult to achieve the growth targets. MARKETS: SECP issues criteria for open end fund mergers

Securities & Exchange commission of Pakistan has issued circular notifying amendments in Pakistan Weekly Review

Market Focus

regulations for merger of open end funds. The entire idea seems to be facilitating the AMC to have mergers of funds having similar investment policies and objectives. This serves as a welcoming change especially at a time when mutual funds industry is facing tough times due to conditions prevalent in the market. The move would allow many expenses and overheads among different funds to be consolidated, benefit due to economies of scale and provide higher liquidity and risk tolerance to fund due to increased size. According to the amendments however, the AMC will have to take approval from fund's three fourth unit holders in addition to its board's approval and the trustee will be required to witness all meetings and approvals and the disclosure requirements pre and post merger for the funds have also been increased through the amendment. SECP amends rules to facilitate acquisition

The mandatory offer size for company acquisition has been reduced through investment friendly climate facilitating rehabilitation of sick units. As per amendment regarding the takeover 50.0% of the acquiring shares has to be bought from public that will lower the total acquisition size from 90.0% to 62.5% - 85.0% of the voting shares depending upon the existing shareholder of the acquirer in the target company and the size of the share purchase agreement.

June 26, 2009

BANKING SECTOR: Askari Bank and Mybank plan to get married

Askari Bank has initiated the process of initially merging Askari Leasing into Askari Bank then merging with MyBank Ltd. Askari Bank has a deposit base of PkR 157 bn, and paid up capital of PkR 5.073 bn at the 1st Qtr end. The bank holds net assets of PkR13.621 bn translating into BVS of PkR 26.8/share as at 1QCY09. The stock currently trades at P/B of 0.64X. The merger would increase the capital of the Bank to meet the Minimum Capital Requirement (MCR) as specified by the central bank. State Bank has set the target of paid-up capital for commercial banks to PkR 6 bn till end December 2009. In case the entities decide to merge rather than one acquiring the other, it is going to be new stock issue to the shareholders of the new combined entity. Mybank has a network of 73 branches having deposit base of PkR 26 bn. The bank has a paid up capital of PkR 5.303 bn and net assets of PkR 6.134 bn translating into BVS of PkR 11.56/share as at 1QCY09. The stock currently trades at P/B of 0.36X. ENERGY & POWER SECTOR: Circular debt: Fire fighting will only save life but much needs to be done

The government has decided to bailout oil and power sector by issuing PkR 24 bn paper guarantees by Ministry of Finance next week. The proposed paper guarantee swould result in PkR Page 4

79 bn reduction in circular debt. No cash transfers will be involved and only book entries will be made and OGDCL and PPL will transfer the equivalent amount of dividends to the government. The current step has been taken after PSO requested government to release PkR 50 bn as it feared that its LCs might default due to liquidity problems. PSO dues have again piled up to PkR 84 bn against different clients. Due to Non payment by clients PSO has defaulted to oil refineries to which it owes PkR 62 bn. Earlier government has issued TFC worth PkR 98 bn to retire the circular debt partly and it was claimed that the issue will be resolved before withdrawing subsidies from the power sector. But within a short period of time the PSO dues have again piled up to the previous level. Such ad hoc measures may provide temporary relief but government needs to find a permanent solution of the problems. MARKET OUTLOOK:

Due to expectations of positive development on the new leverage product in early July, volumes are expected to remain healthy during next week and expected to remain positive. USD 1.5 bn non military aid now just a stamp away by US president which after becoming a law will create optimism about the rest of the pledges made by other friends at Tokyo conference sometime back. We remain positive on the market for the next week with where oil and cement sectors remain favourite. Pakistan Weekly Review

Valuation Guide CURRENT PRICE (PKR)

OIL & GAS MARKETING COMPANY PSO JUNE Sui Northern Gas SNGP JUNE Sui Southern Gas SSGC JUNE OIL & GAS EXPLORATION COMPANY Oil & Gas Dev. Co. OGDC JUNE Pakistan Oilfields POL JUNE Pak. Petroleum Ltd. PPL JUNE COMMERCIAL BANK Habib Bank Ltd. HBL DEC Muslim Comm. Bank MCB DEC NBP DEC National Bank Ltd. United Bank Ltd. UBL DEC REFINERY Attock Refinery Ltd. ATRL JUNE National Refinery Ltd. NRL JUNE AUTOMOBILE ASSEMBLER Indus Motor Co. INDU JUNE Pak Suzuki Motor PSMC DEC FERTILIZER Engro Chemicals ENGRO DEC Fauji Fertilizer Bin FFBL DEC Fauji Fertilizer Co. FFC DEC TECHNOLOGY & COMMUNICATION Pakistan Telecom. PTC JUNE POWER GENERATION & DISTRIBUTION Hub Power Co. HUBC JUNE CEMENT D. G. Khan Cement DGKC JUNE Fauji Cement FCCL JUNE Lucky Cement LUCK JUNE Pakistan State Oil

TARGET PRICE (PKR)

UPSIDE / DOWNSIDE POTENTIAL (%)

RECOMM

YEAR END

SYMBOL

( Updated on June 26, 2009 ) PRICE PERFORMANCE (%) 1-Month

YTD

CURRENT Mkt. Cap. (USD mn)

AVG. Daily Trad.Value (USDmn) 52 Weeks

08A

09F

10F

11F

08A

09F

10F

11F

EPS Growth (%)

EPS (PKR)

207.17

283.88

37.0%

BUY

0.6%

50.8%

458

4.07

81.94

(40.42)

41.61

59.78

199.7%

-149.3%

202.9%

43.7%

31.50

35.79

13.6%

HOLD

1.0%

39.8%

223

0.16

4.55

3.35

4.48

4.07

-6.8%

-26.2%

33.6%

-9.2%

13.49

17.06

26.5%

BUY

4.6%

18.3%

117

0.16

1.48

0.75

1.96

1.97

241.3%

-49.3%

162.5%

0.4% 19.4%

78.12

89.36

14.4%

HOLD

-0.1%

64.5%

4,332

7.58

11.54

13.26

12.95

15.47

8.7%

14.9%

-2.3%

146.79

-

-

*UR

-6.8%

50.8%

-

7.04

43.70

-

-

-

36.4%

-

-

-

188.58

195.39

3.6%

HOLD

6.9%

78.5%

2,018

5.57

23.75

32.28

28.69

31.59

17.5%

35.9%

-11.1%

10.1%

88.25

-

-

*UR

-4.9%

24.1%

864

0.87

17.19

-

-

-

29.4%

-

-

-

155.03

129.58

-16.4%

SELL

-3.3%

29.7%

1,381

6.49

22.25

18.08

19.51

21.86

0.7%

-18.7%

7.9%

12.1%

66.12

95.09

43.8%

BUY

-7.1%

38.3%

918

6.30

14.36

12.98

15.50

15.90

-18.8%

-9.6%

19.4%

2.6%

40.03

54.16

35.3%

BUY

-8.9%

14.1%

574

1.90

8.24

7.65

11.12

14.48

-20.7%

-7.2%

45.4%

30.3%

126.65

219.52

45.5%

BUY

2.4%

122.6%

139

2.37

72.08

20.48

15.21

26.74

720.8%

-71.6%

-25.7%

75.8%

219.52

245.88

12.0%

HOLD

10.4%

142.8%

226

0.16

75.10

18.10

31.81

45.34

42.9%

-75.9%

75.8%

42.5%

111.01

116.00

4.5%

HOLD

-3.3%

-4.9%

112

0.12

29.14

15.68

18.04

19.05

-16.6%

-46.2%

15.1%

5.6%

69.48

132.08

90.1%

BUY

2.5%

-8.1%

74

0.07

7.59

9.04

12.46

13.63

-77.5%

19.0%

37.8%

9.4%

129.85

205.33

58.1%

BUY

-6.5%

34.9%

499

5.51

14.23

12.48

10.97

20.50

34.4%

-12.3%

-12.1%

86.9%

17.50

24.60

40.5%

BUY

0.1%

37.9%

211

1.02

3.10

2.22

3.21

3.16

14.1%

-28.5%

44.6%

-1.5%

87.59

97.70

11.5%

HOLD

-15.4%

42.1%

696

2.33

10.59

12.45

12.50

-

21.8%

17.6%

0.3%

16.94

25.76

52.0%

BUY

0.9%

6.6%

1,114

1.30

(0.55)

1.98

1.91

2.02

-118.1%

458.0%

-3.4%

5.3%

27.33

33.44

22.4%

BUY

5.0%

81.1%

408

0.75

2.25

3.16

4.52

4.95

-2.0%

40.5%

43.2%

9.6%

30.97

39.59

27.8%

BUY

19.0%

53.2%

121

2.17

(0.21)

2.07

2.86

1.25

-103.3% 1084.2%

38.6%

-56.2%

6.71

7.46

11.1%

HOLD

2.1%

34.5%

60

0.15

0.85

1.29

0.61

1.15

-51.2%

51.4%

-52.7%

88.6%

60.64

56.58

-6.7%

HOLD

6.7%

104.1%

253

2.45

9.79

11.59

11.86

12.41

1.2%

18.4%

2.3%

4.6%

44.0%

12.3%

15.4%

ALFALAH SECURITIES UNIVERSE

14,798

-

Recommendation Benchmark: Our recommendation benchmark of BUY and SELL strategy is based on the share price potential upside or downside of 15% from the Current Price.

*

UR= Under Review; NM= Not Meaningful

NOTE: Slight adjustments in Fair Values of FFC & ENGRO due to updation of CY08 actual numbers.

June 26, 2009

Page 5

Pakistan Weekly Review

COMPANY NAME

SYMBOL

Valuation Guide

08A

09F

OIL & GAS MARKETING COMPANY PSO 2.53 (5.13) Pak. State Oil Sui Northern Gas SNGP 6.93 9.39 Sui Southern Gas SSGC 9.14 18.03 OIL & GAS EXPLORATION COMPANY Oil & Gas Dev. Co. OGDC 6.77 5.89 Pakistan Oilfields POL 3.36 Pak. Petroleum Ltd. PPL 7.94 5.84 COMMERCIAL BANKS Habib Bank Ltd. HBL 5.13 Muslim Com. Bank MCB 6.97 8.57 National Bank Ltd. NBP 4.60 5.09 United Bank Ltd. UBL 4.86 5.24 REFINERY Attock Refinery Ltd. ATRL 1.76 6.18 National Refinery Ltd. NRL 2.92 12.13 AUTOMOBILE ASSEMBLERS Indus Motor Co. INDU 3.81 7.08 Pak Suzuki Motor PSMC 9.15 7.69 FERTILIZER Engro Chemicals ENGRO 9.12 10.41 Fauji Fertilizer Bin FFBL 5.64 7.88 Fauji Fertilizer Co. FFC 8.27 7.03 TECHNOLOGY & COMMUNICATION Pakistan Telecom. PTC *NM 8.54 POWER GENERATION & DISTRIBUTION Hub Power Co. HUBC 12.16 8.66 CEMENT D. G. Khan Cement DGKC *NM 14.99 Fauji Cement FCCL 7.88 5.21 Lucky Cement LUCK 6.19 5.23 ALFALAH SEC.UNIVERSE

* PB (X)

P.E. (X)

6.19

10F

11F

08A

09F

ROE (%) 10F

11F

08A

09F

DIVIDEND YIELD (%)

10F

11F

08A

09F

10F

NET PROFIT MARGIN (%)

11F

08A

09F

10F

11F

DEBT / ASSETS (%) 08A

09F

10F

11F

4.98

3.47

1.15

1.66

1.53

1.38

45.4% -32.3% 30.7% 39.7% 11.3% 7.2% 15.1% 21.6%

2.8%

-1.1%

1.1%

1.3%

7.03

7.75

1.01

0.99

0.94

0.90

14.6% 10.5% 13.3% 11.6%

9.5%

8.7%

8.7%

8.7%

2.0%

1.0%

1.3%

1.1%

4.4% 10.3% 8.4%

6.87

6.84

0.88

0.91

0.83

0.78

9.6%

9.3%

3.7%

7.4%

7.4%

1.3%

0.5%

1.5%

1.4%

22.3% 19.9% 21.2% 21.4%

6.03

5.05

3.07

2.78

2.55

2.31

45.4% 47.2% 42.2% 45.8% 11.8% 13.6% 13.3% 15.8% 39.5% 44.5% 43.3% 41.7%

0%

0%

0%

1.38

-

-

-

36.5%

0%

-

-

-

3.58

2.77

2.30

1.94

0%

0%

0%

0%

6.57 -

5.97 -

5.0%

-

12.0% 11.4%

13.2%

-

-

-

45.1% 47.4% 35.0% 32.6%

8.2%

8.9%

7.9%

8.7%

-

-

-

-

-

41.0%

-

-

-

43.1% 44.6% 41.5% 42.0%

35.5% 74.6% 64.5% 58.1% 7.1%

0%

0.93

-

-

-

19.3%

6.8%

-

-

-

4.9%

-

-

-

-

-

-

-

7.95

7.09

1.83

1.66

1.50

1.36

27.1% 20.3% 19.8% 20.1%

8.1%

5.8%

6.5%

7.1%

7.8%

7.6%

7.4%

7.8%

-

-

-

-

4.27

4.16

0.69

0.64

0.59

0.55

14.1% 13.1% 14.4% 13.7%

9.8%

7.6% 10.6% 11.3%

5.8%

5.0%

4.8%

4.6%

-

-

-

-

3.60

2.76

1.02

0.95

0.85

0.75

19.3% 18.8% 24.9% 27.0%

6.2% 12.5% 15.0% 20.0%

5.4%

4.1%

4.2%

4.3%

-

-

-

-

8.32

4.74

0.93

0.84

0.78

0.68

35.6%

4.9%

3.2%

4.0%

2.1%

5.3%

2.0%

2.0%

4.4%

0.8%

0.6%

0.7%

0%

0%

0%

0%

6.90

4.84

1.01

1.00

0.93

0.83

34.5%

8.3%

13.5% 17.2%

7.6%

6.8%

8.2%

9.1%

4.6%

1.3%

2.3%

2.7%

0%

0%

0%

0%

6.15

5.83

49.07

26.40

30.38

32.08

24.3% 12.1% 12.7% 12.3%

9.5%

5.4%

5.4%

5.4%

0.0%

0.0%

0.0%

0.0%

5.7%

3.5%

1.5%

0.0%

5.58

5.10

0.40

0.39

0.36

0.34

4.4%

6.7%

1.4%

2.2%

2.2%

2.2%

1.6%

3.8%

4.3%

4.0%

1.0%

1.0%

0.9%

0.9%

11.84

6.33

1.68

1.56

1.43

1.30

18.4% 15.0% 12.1% 20.5%

4.6%

2.9%

2.5% 12.6% 18.2% 14.1%

8.7%

12.5% 32.8% 36.6% 35.7% 34.4%

5.45

5.53

1.56

1.66

1.53

1.49

27.7% 21.1% 28.1% 27.0% 16.3% 11.4% 16.5% 16.3% 10.8%

9.0%

8.7%

0.0%

0.0%

0.0%

0.0%

7.01

-

3.52

3.10

3.01

-

-

0%

0%

0%

0%

8.85

8.40

0.88

0.80

0.79

0%

0%

0%

0%

6.04

5.52

1.11

1.10

1.08

10.82

24.69

0.26

0.46

11.02

5.84

0.50

0.44

5.11

4.89

1.05

0.89

6.20

5.15

2.05

5.0%

6.5%

51.0% 55.0% 53.7%

0.0%

15.7% 13.5% 13.5%

0.77

-2.9%

9.4%

9.2%

0.0%

1.06

9.0%

12.8% 18.0% 19.3% 10.1% 10.4% 14.9% 16.3%

0.44

0.43

-0.2%

3.1%

4.1%

1.7%

0.6%

1.1%

1.0%

1.0%

0.42

0.39

4.5%

8.4%

3.8%

6.7%

0%

0%

0%

0%

0.77

0.67

14.4% 17.0% 15.0% 13.7%

0%

1.6%

1.6%

1.6%

1.91

1.63

30.0% 28.0% 27.3% 26.1% 8.4%

9.2%

9.7% 10.9% 20.8% 23.5% 22.6% 21.5% 4.2%

8.9%

9.4%

*

9.0%

-

7.5%

9.5%

21.3% 19.2% 17.7%

-4.6% 17.3% 16.8% 17.0% 4.2%

4.5%

-0.4%

3.9%

11.7% 16.4%

6.0%

6.2%

34.5% 28.5% 33.4% 30.5%

5.0%

2.1%

27.0% 29.3% 22.6% 18.4%

7.5%

7.7%

3.4% 36.3% 31.7% 28.3%

15.8% 15.5% 14.8% 14.4% 30.7% 20.2% 19.3% 13.4% 5.3% 4.9% 4.5%

FYO6E Year End = December

* PB (x) in Banking Sector = PB with revaluation surplus

June 26, 2009

Page 6

Pakistan Weekly Review

Alfalah Securities (Pvt.) Ltd. MANAGEMENT

RESEARCH TEAM

MONEY MARKET TEAM

EQUITY SALES TEAM

BRANCH OFFICES LAHORE OFFICE

Shoib Memon

Research Analyst

Sohail Ahmed Faruqui

HEAD OFFICE (Karachi)

FOREX TEAM

M. Muzammel Hussain

Zahid Khan

Mohammad Ali Yacoob

Zeeshan Saeed Butt

Arshad Shoaib Siddiqui

Omais Ainul Yaqin

S. Hasan Mehdi Rizvi

Zaheer Ahmed

Abrar ul Hassan

M. Khurram Irfan

Ansar Anis Bhesania

Samad Ilyas

Kamlesh Kumar

Ibrahim Abid Mir

Investment Product Development & Distribution

Uzma Taslim

Muhammad Awais

ISLAMABAD OFFICE

Abdur Rehman

Abdul Ahad Effendi (IBG)

Muhammad Raheel Shah

Muhammad Irfan

Zohra Jannat Ali Muhammad Faraz Siddiq Syed Adnan Hashmi Muhammad Junaid Rafiq

Syed Abrar Hussain

ONLINE TRADING

Research Database

Mohammad Faizan

S. Adnan H. Jaffery

Khawaja Khurram Latif

Mohammad Nasir Muhammad Azam

Jamal Tariq Hikmatullah

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